India’s latest manufacturing data shows the sector gaining momentum, a sign that GST cuts have stoked demand and production. Amid global trade headwinds, can this upswing withstand external shocks?
India's latest manufacturing data shows the sector gaining momentum, a sign that GST cuts have stoked demand and production. Amid global trade headwinds, can this upswing withstand external shocks?
There's fresh evidence the goods and services tax (GST) cuts are lifting economic activity in India. The HSBC India Manufacturing Purchasing Managers' Index (PMI) has climbed to 59.2 in October from 57.7 in September. Readings above 50 indicate an expansion while those below point to contraction.
That it was already much above that threshold and has now risen further points to growing strength in the sector. The PMI survey's findings showed October's expansion was supported by strong domestic demand, leading to increased output and purchases.
This broadly mirrors trends seen in other parts of the economy where lowered GST rates have whetted demand for goods and services alike. Automobile sales, which contribute majorly to Indian manufacturing, have been on high gear.
That said, overseas demand seemed to lose some momentum. This isn't a surprise given the global uncertainties amid America's tariffs. Any calming of these external headwinds could give India's economy a further tailwind. To be sure, talks between Washington and New Delhi are underway. While officials haven't sounded too confident, a deal if struck could serve the trade goals of both countries well.