PURCHASING MANAGERS’ INDEX (Syllabus: GS Paper 3 - Economy)

Context: India’s services sector output, as measured by the S&P Global India Services Purchasing Managers’ Index (PMI), rebounded from a three-month low in June to record a 13-year high of 62.3 in July. 

• A reading of over 50 on the index indicates an expansion in activity levels.
• Output levels improved at the sharpest pace since June 2010 as per the survey-based index, with firms attributing this upturn to strong demand and new business gains.

PMI or a Purchasing Managers’ Index (PMI)

• It is an indicator of business activity - both in the manufacturing and services sectors. 
• It is a survey-based measures that asks the respondents about changes in their perception of some key business variables from the month before. 
• It is calculated separately for the manufacturing and services sectors and then a composite index is constructed.
• A figure above 50 denotes expansion in business activity. 

• Anything below 50 denotes contraction. 

• Higher the difference from this mid-point greater the expansion or contraction. 

• The rate of expansion can also be judged by comparing the PMI with that of the previous month data. 
• If the figure is higher than the previous month’s then the economy is expanding at a faster rate. 
• If it is lower than the previous month then it is growing at a lower rate.