Output optimism | Mint

After a 6% expansion in core output this February, India’s manufacturing purchasing managers’ index (PMI) is the latest indicator to point to production looking up. The PMI for March rose to 56.4, a three-month high, from 55.3 in February, nicely above the 50 mark that separates expansion from contraction. These indicators make for optimism about the health of manufacturing, which has had a patchy recovery from pandemic disruptions. Healthy demand for automobiles, whose performance undergirds that of the entire sector, offers further validation of India’s production uptrend. But with global growth entering a phase of uncertainty, India’s economic momentum is likely to face headwinds. While our exports have already slowed, the PMI survey shows manufacturers have started shedding jobs too. Though the employment drop in March was marginal, it was the first in more than a year and could cause concern if this slide continues. With inflation reigning high, Indian policymakers are expected to stay focused on cooling price pressures. The sooner price instability ends, the easier it will be for credit conditions to turn in favour of enhanced economic activity.