December’s PMI data suggests that Indian manufacturers are approaching capacity limits, potentially spurring new private sector investments. Maintaining the word count as close as possible.
India’s manufacturing sector concluded 2023 on a subdued note, as the purchasing managers’ index (PMI) experienced an 18-month low, declining to 54.9 last month from 56 in November. Although still within the expansion zone, the growth of new orders has decelerated, particularly from export markets. The anticipated weak external orders accentuate the heightened importance of domestic demand for the year ahead.
It’s crucial to contextualize the PMI reading within its parameters. According to the index’s methodology, a figure above 50 indicates expansion, while a reading below signifies contraction. The magnitude of this distance from the benchmark reflects the sector’s strength of expansion. As long as it remains comfortably above the tipping point, it is reasonable to anticipate Indian factories to continue towards capacity exhaustion, stimulating new private sector investments.
Across various global regions, such as China, there has been a slower pace in filling order-books, potentially leading foreign industrial players to consider diverting surplus output to other markets. It is essential to remain vigilant for any indicators of such activities; however, it is imperative not to conflate legitimate competitiveness with dumping.
