Purchasing Managers’ Index (PMI)

Why in the News? 

HSBC India’s Manufacturing PMI indicates that India’s manufacturing sector expanded in August 2025 at the fastest pace seen in the last 17.5 years.

• PMI rose to 59.3 in August 2025 (up from 59.1 in July), the highest since mid-2008.
• The surge was driven by strong demand, rise in new orders, higher production, and job creation.
• However, U.S. tariff hike on Indian goods (50%) slightly impacted new export orders.

Key Points: Purchasing Managers’ Index (PMI)

• Fastest Expansion Since 2008 – PMI at 59.3 marks strongest improvement in operating conditions in over 17 years.
• Domestic Demand Surge – Sharp increase in new orders and production volumes (quickest in 5 years).
• Employment Boost – Companies created more jobs in anticipation of sustained demand.
• Stocking Up – Firms increased raw material purchases to meet future demand.
• External Challenge – Expansion in export orders slowed down because of uncertainty around U.S. tariffs.

About Purchasing Managers’ Index (PMI)

• Definition: A measure of economic activity based on monthly surveys of private sector manufacturing and service companies. It signals the prevailing business conditions.
• Source: In India, the PMI is released by HSBC, previously managed by S&P Global/IHS Markit.

Range:

• Above 50 → Expansion in activity.
• Below 50 → Contraction in activity.
• Exactly 50 → No change.

Significance:

• Provides early indication of economic trends.
• Helps policymakers (RBI, Govt.) and investors assess the health of the economy.
• Covers output, new orders, employment, suppliers’ delivery times, inventory levels.

Types in India:

1. Manufacturing PMI – tracks industrial production trends.
2. Services PMI – gauges activity in the service sector.
3. Composite PMI – combines both.