This article provides insights into core economic concepts including PMI, IIP, GDP, and Inflation. It also highlights key issues related to economic growth and development as well as the current state of India’s economy. The main source of this information is data recently released by the S&P Global India Manufacturing Purchasing Managers’ Index (PMI).
S&P Global India Manufacturing PMI: Recent Developments
In recent news, the PMI showed slight acceleration in India’s manufacturing sector, with new orders and output rising to 54.7 in April 2022 up from 54 in March 2022. Key highlights from this data include a rebound in new export orders in April after experiencing its first contraction in nine months during March. This contraction suggests a decline in the economy; a phase typically occurring post the business cycle’s peak and preceding its trough.
Inflation and Its Current State
Currently, inflationary pressures have increased due to several factors like rising commodity prices, the ongoing Russia-Ukraine war, and escalating transportation costs. This surge has led to a five-month high increase in input prices, while output charge inflation has reached a yearly high.
The Concept of PMI and Its Importance
The Purchasing Managers’ Index (PMI), is a survey-based measure that investigates respondents’ changes in perception of crucial business variables from the previous month. It serves as an indicator of economic trends in manufacturing and service sectors. The main purpose of the PMI is supplying information about present and future business conditions to company decision makers, analysts, and investors.
Calculation and Interpretation of PMI
PMI ranges from 0 to 100 where a print above 50 indicates expansion, a score below 50 denotes contraction, and a reading at 50 signifies no change. If the PMI of a previous month is higher than the current one, it suggests an economic contraction. IHS Markit, a global leader in information and analytics, compiles the PMI for more than 40 economies worldwide.
PMI vs IIP
While the Index of Industrial Production (IIP) also gauges the level of activity in the economy, the PMI and IIP are distinct from each other. The IIP covers a broader industrial sector compared to PMI. However, PMI tends to be more dynamic compared to a standard industrial production index.
The Significance and Impact of PMI
PMI is becoming increasingly valuable as an indicator of business activity worldwide. It provides reliable forecasts about an economy’s performance, particularly in manufacturing. PMI helps central banks set interest rates, influences equity market movements, impacts bond and currency markets, and enhances the appeal of an economy to investors. Suppliers also make pricing decisions based on PMI movements.
Relevance to Civil Service Examination
For potential civil service examination takers, understanding concepts around S&P 500 is important. S&P 500, or Standard & Poor’s 500, is an American stock index, considered as the best barometer of large-capital US equities.
Understanding PMI and its significance in economic trends and forecasting can be vital for different stakeholders including analysts, investors, central banks, and businesses.
