The Prime Minister’s Economic Advisory Council (PMEAC) on Wednesday advised caution in interpreting the data released by HSBC Purchasing Managers’ Index (PMI) on services sector.
Its chairman, C Rangarajan, said other parameters do not suggest that services are contracting, as is shown by PMI data.
“We should exercise caution in interpreting PMI services numbers,” he told Business Standard.
However, Rangarajan agreed there were other parameters that suggest a slowdown in the growth of manufacturing, as the PMI revealed.
On their part, industry chambers like Confederation of Indian Industry, Federation of Indian Chambers of Commerce and Industry (Ficci) and the Associated Chambers of Commerce and Industry of India (Assocham) point out that the PMI data showed a growth slowdown that is spreading to sectors, and blamed successive Reserve Bank of India (RBI) rate hike for a moderation in the growth momentum.
PMI data showed that private sector services activities contracted last month, for the first time since April 2009, which was a period of global financial crisis. Also, manufacturing index was almost close to contraction point.
Rangarajan’s remarks today assume importance since various parameters point to a slowdown in manufacturing growth, but services sector growth indications are difficult to get as they are released once in a quarter as part of the gross domestic product (GDP) numbers.
According to India’s official figures, eight core industries grew at the slowest pace in 11 months at 3.5 per cent this August — down more than half of their highest growth in a year at 7.8 per cent in July.
Already industrial growth plummeted to a 21-month low of 3.3 per cent in July and that too when core sector performed stupendously. Within industry, manufacturing growth fell to just 2.3 per cent in July.
Ficci said the slowdown in PMI reflects that the slowdown fears were becoming all-encompassing. “The Index of Industrial Production data, recently released export data and the balance of payment data all point towards a deteriorating macro-economic environment-both external and internal,” according to Soumya Kanti Ghosh, director (economics & research), of the industry chamber.
Exports were quite high in August year-on-year, but have sequentially shown a decline in the month.
Industry constitutes over 18 per cent of India’s GDP, while services (including construction) account for 63 per cent. Assocham, while attributing the main blame on RBI’s rate hike spree, said high input costs amid global economic uncertainties – especially in the Eurozone – were adding to negative sentiments.
