Central Idea

India’s manufacturing sector experienced a slowdown in September, reaching a five-month low, according to the seasonally adjusted S&P Global India Manufacturing Purchasing Managers’ Index (PMI).
The PMI eased to 57.5 from August’s 58.6. A reading of 50 reflects no change in activity levels.

Purchasing Managers’ Index (PMI)

PMI is an indicator of business activity — both in the manufacturing and services sectors.
It is a survey-based measure that asks the respondents about changes in their perception of some key business variables from the month before.
It is calculated separately for the manufacturing and services sectors and then a composite index is constructed.
The PMI is compiled by IHS Markit based on responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers.

The PMI is derived from a series of qualitative questions.
Executives from a reasonably big sample, running into hundreds of firms, are asked whether key indicators such as output, new orders, business expectations and employment were stronger than the month before and are asked to rate them.

A figure above 50 denotes expansion in business activity. Anything below 50 denotes contraction.
Higher the difference from this mid-point greater the expansion or contraction. The rate of expansion can also be judged by comparing the PMI with that of the previous month data.
If the figure is higher than the previous month’s then the economy is expanding at a faster rate.
If it is lower than the previous month then it is growing at a lower rate.

Mild Slowdown: The manufacturing industry in India showed mild signs of a slowdown in September, primarily due to a softer increase in new orders, which tempered production growth.
Positive Outlook: Despite the slowdown, both demand and output saw significant improvements, and manufacturers maintained a strongly positive outlook for production.
Job Creation and Input Stocks: Upbeat forecasts continued to drive job creation efforts and initiatives to replenish input stocks, indicating a favourable trajectory for the Indian manufacturing industry.
Concerns: However, the solid increase in output charges, despite easing cost pressures, could limit sales in the coming months, prompting caution.