Context
- Recently, India’s manufacturing sector recorded stronger growth in May 2026, supported by rising domestic demand, infrastructure development, and increased new orders.
- The seasonally adjusted HSBC India Manufacturing PMI rose to 55.0 in May 2026 from 54.7 in April, reaching a three-month high. The sector continued to expand despite higher costs of fuel, transportation, and raw materials due to global inflationary pressures.
1. What is the Purchasing Managers’ Index (PMI)?
- Definition: It is a survey-based economic indicator designed to track and gauge the month-on-month changes in business and economic conditions.
- Compilation: For India, it is compiled monthly by S&P Global (sponsored by HSBC) based on questionnaires sent to senior executives/purchasing managers at roughly 400 to 500 private manufacturing firms.
- Types of PMI: It is calculated separately for the Manufacturing sector and the Services sector, which are subsequently aggregated into a Composite PMI.
2. How to Interpret the PMI Score?
The PMI is expressed as a headline number ranging from 0 to 100:
- Score > 50: Indicates an expansion in economic activity compared to the previous month.
- Score < 50: Indicates a contraction in activity compared to the previous month.
- Score = 50: Represents no change or status quo in business conditions.
3. PMI vs. IIP
| Feature / Parameter | Purchasing Managers’ Index (PMI) | Index of Industrial Production (IIP) |
| Compiled By | Private entity (S&P Global / HSBC). | Government entity (National Statistical Office – NSO, Ministry of Statistics & Programme Implementation – MoSPI). |
| Nature of Indicator | Leading Indicator: Reflects forward-looking business expectations and sentiment. | Lagging Indicator: Reflects actual, historical physical output from a past period. |
| Basis of Measurement | Month-on-Month (m-o-m): Compares the current month’s conditions directly to the preceding month. | Year-on-Year (y-o-y): Compares production volumes against a fixed base year (Current Base Year: 2022-23). |
| Sectoral Coverage | Covers Manufacturing and Services sectors. | Covers Mining, Manufacturing, and Electricity (broad industrial sector). |
| Formal vs. Informal | Under-represents small and medium enterprises (SMEs) and informal units; leans toward large firms. | Broader, more formal, statistical representation via fixed commodity baskets. |
With reference to the Purchasing Managers' Index (PMI), consider the following statements:
1. It is a survey-based economic indicator.
2. It measures month-on-month changes in business conditions.
3. It is compiled by the National Statistical Office (NSO).
Which of the statements given above are correct?
a) 1 and 2 only
b) 2 and 3 only
c) 1 and 3 only
d) 1, 2 and 3
Answer: A
Explanation:
• Statement 1 is correct: PMI is a survey-based economic indicator that assesses business activity and economic conditions.
• Statement 2 is correct: It tracks month-on-month changes in business conditions such as output, new orders, employment, and prices.
• Statement 3 is incorrect: In India, PMI is compiled by S&P Global (sponsored by HSBC), not by the National Statistical Office (NSO). NSO compiles the Index of Industrial Production (IIP).