There’s a thick silver lining in the macro data that is buoying sentiments. It’s the Nikkei India Manufacturing Purchasing Managers’ Index (PMI). This crucial indicator of the manufacturing sector’s health rose to an 11-month high of 54 in November from 53.1 in October. This data has given confidence to the Reserve Bank of India, which has used it in its commentary to convey that a slow turnaround was taking place in manufacturing. It’s heartening to see that the high PMI for manufacturing is supported by an expansion in output and domestic and export orders.
This bright spot in the data, though, gets slightly clouded by the slowdown in the index of industrial production (IIP) to 4.5% in September. What’s salvaging it is the capacity utilisation figure, which, after a long gap, finally seems to be improving. Capacity utilisation, measured by the Reserve Bank of India’s order books, inventories and capacity utilisation survey (OBICUS), moved up to 76.1% in second quarter from 73.8% in first quarter.
All this has infused confidence in the apex bank to assess that the overall business sentiment in the third quarter will remain “stable, with sustained optimism about production and exports”. Economists are also viewing this data as a growth booster, which could blunt the impact of base-effect on growth in the third and fourth quarters.