India’s purchasing managers’ index slipped to 57.5 in September from 58.6 in August. Though the lowest in five months, the reading is still solidly above the 50 mark that separates expansion from contraction. This indicates that the sector’s order books continued to swell at a robust pace, although the momentum slowed a bit. Overall, it offers more reason to cheer than feel disappointed. Buzzy commercial activity can be seen even in the goods and services tax mop-up, which showed an over 10% increase from a year earlier to ₹1.62 trillion in September, beating inflation. Also, core output, according to the most recent data, rose 12.1% year-on-year in August compared with 8% in July. Broadly, these numbers present an optimistic picture of Indian manufacturing. But with crude oil prices heating up, input prices and inflationary pressures in general could flare up again, posing another set of challenges. For the Reserve Bank of India, high inflation is the big worry for now. Though a recent cool-off in food prices has been a relief, its pandemic stimulus withdrawal may have to go further, with its real policy rate kept sustainably positive, before it can ease credit again.
