Industry and Infrastructure
What is the PMI Index?
WHAT?
The Purchasing Managers' Index (PMI) is an economic indicator derived from monthly surveys of private sector companies. It reflects the prevailing direction of economic trends in manufacturing and services sectors.
Who publishes PMI in India?
- Compiled by: S&P Global (formerly IHS Markit)
- Published for India by: S&P Global
- Not released by government bodies like MOSPI or RBI
Types of PMI in India
| PMI Type | Sector Covered |
|---|---|
| Manufacturing PMI | Factories, industrial output |
| Services PMI | Banking, IT, hospitality, etc. |
| Composite PMI | Weighted average of Manufacturing & Services PMI |
How is PMI Calculated?
Based on responses to 5 key components from a survey of purchasing managers:
- New orders
- Output (production)
- Employment
- Supplier delivery times
- Inventories of purchases
Each component is assigned a weight, and the PMI is calculated as a diffusion index.
PMI Value Interpretation
| PMI Value | Economic Signal |
|---|---|
| > 50 | Expansion in economic activity |
| = 50 | No change (neutral) |
| < 50 | Contraction in activity |
Higher the value above 50, stronger the expansion.
Example
If India’s Manufacturing PMI rises from 52.0 to 55.5 in a month:
- It indicates stronger expansion in factory activity
- May lead to positive investor sentiment
- Could influence RBI to consider inflation-growth trade-offs
INDIA'S Manufacturing PMI in last 6 months
PMI vs Other Indicators
| Aspect | PMI | IIP / GDP |
|---|---|---|
| Frequency | Monthly | IIP (monthly), GDP (quarterly) |
| Timeliness | Very timely (early signal) | Often delayed |
| Based On | Survey (perception-based) | Actual data (fact-based) |
| Sector Coverage | Manufacturing/Services | Entire economy (incl. agri.) |
Why is PMI Important?
- Leading Indicator: Signals future economic performance before GDP/IIP data
- Monetary Policy Signal: Central banks use it to gauge inflation/slowdown risks
- Investor Sentiment: Triggers market reactions in equity and currency markets
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