Source: IE
Context: India’s Composite Flash Purchasing Managers’ Index (PMI) increased to 60.6 in February 2025, marking the first rise after three consecutive quarters of decline.
About Purchasing Managers’ Index (PMI):
- What is PMI?
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- PMI (Purchasing Managers’ Index) is an economic indicator derived from monthly business surveys.
- It measures activity at the purchasing/input stage, unlike IIP (Index of Industrial Production), which tracks actual output.
- There are two types:
- Manufacturing PMI – Tracks industrial and factory activity.
- Services PMI – Assesses the growth in the services sector.
- PMI above 50 indicates economic expansion, while below 50 signals contraction.
- Who Releases PMI in India?
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- S&P Global (earlier released by IHS Markit) conducts PMI surveys in India.
- Based on a survey of 500 manufacturing companies for the Manufacturing PMI.
- PMI Calculation Methodology:
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- Derived from qualitative responses of purchasing managers.
- Five key indicators with assigned weights:
- Significance of PMI:
- Early Indicator: Released before official industrial and GDP data, making it a leading economic indicator.
- Monetary Policy Tool: Central banks use it to assess inflationary trends and adjust interest rates.
- Investor Confidence: PMI influences stock markets, bond markets, and corporate earnings forecasts.
- Economic Competitiveness: A strong PMI boosts investor confidence, enhancing a nation’s economic attractiveness.
