PMI or Purchasing
Managers Index is an indicator of the economic health of Manufacturing Industry
which is calculated on a monthly basis. The minimum threshold is considered as
45 while anything above 50 is rendered as an expansion over the previous month.
Unfortunately, India’s PMI for the month of September is languishing at 49.6,
which is a shade better than the month of August which registered a figure of
48.5. Orders have dried up and employment is on a downward spiral. As per
Markit, the firm that carries out the global survey, a drought of export orders
has been instrumental in causing the current state-of-affairs.
The picture looks all
grey at this instant. But Credit Suisse has claimed an altogether different
theory. As per the organization’s analysts, PMI has little or no co-relation
with the Indian economy and can be quite misleading. “There have
been periods when correlation between India’s manufacturing PMI and
output growth has been non-existent or indeed even negative. This has been true
of the past couple of years for example, as we have
highlighted in chart. From mid-2011 to mid-2013, the
correlation between the two series has been just 0.09”, says the note released
by Credit Suisse. The following image would clarify the matter further
The figure shows a
correlation of 0.09 which is almost negligible. Similar scenario exists in the
case of Services PMI. The PMI showed growth while in reality it was a slowdown.
With all these facts in the open, it is quite obvious that the PMI would be
under the radar in coming days.
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