India's PMI and growth prospects

The July PMI was slightly lower than the June PMI, but both readings were above the 50-mark, indicating expansion in the manufacturing sector. The decline in the July PMI was likely due to a number of factors, including rising input costs, supply chain disruptions, and a slowdown in demand. However, the overall picture for the Indian manufacturing sector remains positive, with the PMI remaining above the 50-mark for the 25th consecutive month.

Here is a table comparing the July and June PMIs:

Indicator	July	June
Manufacturing PMI	57.7	57.8
Output	57.5	57.8
New orders	58.3	58.7
Input prices	62.7	62.5
Employment	51.0	50.7
Business confidence	63.3	63.4

As you can see, July PMI was lower than the June PMI in all but one indicator. However, the overall picture for the Indian manufacturing sector remains positive, with the PMI remaining above the 50-mark for the 25th consecutive month.

The July 2023 PMI report for India did not include any specific figures on corporate profits. However, the report did state that input costs rose at the fastest pace in over two years, driven by higher prices for raw materials and energy. This suggests that corporate profits may have been squeezed in July, as firms were forced to pass on higher costs to their customers.

The report also stated that business confidence remained strong, with firms optimistic about the outlook for the next 12 months.Even though GST collections are robust and Income tax collections are rising, Corporate Tax collections have not grown to that extent which also indicates some strain in Corporate profit levels till June quarter end.

Added to that are many Global headwinds hitting Indian economy like fall in Exports especially in Services after June quarter, higher crude prices, higher inflation triggered by hardened food & commodity prices, higher interest costs coupled with tight liquidity conditions, lower disposable income in rural areas affecting demand, tardy monsoon rains likely to be affected by looming El Nino threat, may all dampen the growth prospects in the remaining 8 months of this fiscal.

Only after the end of second quarter of this fiscal in Sep23, we can make realistic assessment of growth prospects for the rest of the fiscal. In all likelihood hitting 6% GDP growth or thereabout this fiscal looks more probable.

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