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Last updated: 07 May, 2018  

Industry.9.4.Thmb.jpg Manufacturing, services data fuels optimism

Industry.9.4.jpg
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Bikky Khosla | 07 May, 2018

In a positive development India's manufacturing growth rose in April. Though marginal, the growth, as reflected by the Nikkei India Manufacturing Purchasing Managers Index (PMI), is encouraging. In a similar line, output of the services sector also rose for the month, with the seasonally adjusted Business Activity index registering an overall increase from 50.3 in March to 51.4 in April. It is really good to see that both the key sectors reported a positive start in the April quarter.

This is the ninth consecutive month that the manufacturing PMI remained above the 50-point-mark, a reading that indicates expansion. Besides strong demand that led to new business orders, another positive factor that played a key role in manufacturing expansion was low inflationary pressure. So, while the improved figures show that the manufacturing economy has started the quarter on a slightly stronger footing, they also fuel hope of rate cuts by RBI which in its monetary policy last month had left the repo rate unchanged.

Meanwhile, the service sector index presents a similar picture. In this case again strong demand and easing inflationary pressure drove the sector's growth. Additionally, job-creation accelerated at the fastest pace in more than seven years. Meanwhile, the government last week said that it was working on a strategy to promote services exports. This, along with a Rs 5,000 crore plan to promote 12 champion services sectors, will give a big push to the sector, which accounts for about 62 percent of the economy.

Growth registered by both the sectors, supported by improved demand conditions, gives a clear indication that the Indian economy is gradually shrugging off the disruptions caused by a goods and services tax (GST) and demonetisation. Additionally, with price pressure moderating and wide expectations that it may moderate further in April from March's five-month low, it seems unlikely that RBI will let such an opportunity to push growth slip away.

I invite your opinions.

 
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