India’s manufacturing gains and Services sector lose momentum

India’s manufacturing PMI ticked up to 52.7 in May from 51.7 in April 2019 strongest recovery in the last three months. Improvement in the manufacturing activity in May compared to the previous  month provided a silver lining after an earlier reported GDP growth for Q4, FY2018-19 showed lowest rate in the last five years. The growth in the index has been supported by revival in new orders. The revival suggests that growth in employment and sales components of PMI would pick up in coming months. The survey respondents pointed out factors such as expectations of pro-business government policies, marketing initiatives, projects in the pipeline and favorable economic conditions for boosting optimism in the sector.

On the other hand, India’s dominant service sector experienced sluggishness as services PMI declined to 50.2 in May from 51.0 in April this year. Despite the slowdown, the index stayed above 50, thus remained in expansionary territory. The service sector suffered due to general elections, softening in new work and business activity. The slowdown in the sector seems to be temporary as pick up in hiring and improvement in confidence among companies would bring back the sector on track.