January 2020 manufacturing activity is at its highest since November 2012, found Nikkei India's Index for Manufacturing Purchasing Managers. New hiring rates are quickest in seven years. Really, is economic slowdown over?
Finally, Prime Minister Narendra Modi is getting some good news from the economy world with Union Finance Minister Nirmala Sitharaman. Manufacturing, consumption and job creation significantly up by January 2020.
The Indian economy is suddenly buzzing, yet again. A survey showed that January's monthly production activity suddenly shot up to an eight-year high in India.
This is remarkable in the sense it definitely conveys that at the factory gates their strong demand surge is. That means consumption has spiked in India, which had been lying laggard. Responsible for the long-term economic slowdown in India was the continued low consumption.
The Nikkei India Purchasing Managers ' Index (PMI), prepared by IHS Markit, has now risen from 52.7 in December 2019 to 55.3 in January 2020.
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PMI is a key to understanding fabrication activity. A PMI exceeding 50 indicates that manufacturing activity is expanding. Spike in demand has been attributed to the surprise improvement.
The principal pull force is the segment of consumer goods. But the real good news could be expanding in the capital goods segment, which indicates that investments in the Indian economy could have just revived.
That comes on the back of last week's Economic Survey and Union Budget. Both projected a growth rate of 6-6.5 per cent of GDP for 2020-21 rather higher than expected. The projection was called too optimistic and too ambitious by experts.
Indeed, India Ratings (Ind-Ra), rating agency arm Fitch, downgraded Indian companies ' corporate credit ratings. This came after the presentation of their Union budget 2020 by Union Finance Minister Nirmala Sitharaman. The ratings agency forecasted a 5.6 per cent growth rate for 2020-21. Its 2019-20 projection is 4.6 per cent against 5 per cent of government.
India Ratings assessment is in line with estimates of India's economic growth by the International Monetary Fund (IMF). The IMF sees India growing at 5.8 per cent in 2020-21 and predicts that only 2021-22 will be possible for India to grow by 6.5 per cent.
Both the Fitch and the IMF appear to worry about India breaching its fiscal deficit target. Sitharaman pegged the fiscal deficit to 3.8 per cent for the current year, estimating it would be 3.5 per cent in 2020-21. Higher fiscal deficit target virtually makes business in the country more expensive and therefore difficult to do.
The surprise from the manufacturing sector, however, may soothe government nerves. PMI is at its highest since February 2012 for January. Simply put, sales have risen and the labor market is rising. The survey found that new-worker hiring saw a sharp push— the fastest rate in seven years. This is primarily because of the growth of new companies.
There is more to it. A spurt has been seen on exports. PMI indicators show that as of November 2018 fresh export orders have risen at the fastest rate. The drive for exports stemmed from rising consumer demands in Asia, Europe and North America.
But here, good news isn't ending. Crude oil prices fell and the BSE Sensex recovered from the budget-day shock and rebounded to finish higher on Monday, opening on Tuesday with a fresh upward push.
That does not, however, mean that economic slowdown is definitely over. Still cautious are market watchers and agencies, such as Fitch and the IMF.
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