The Reserve Bank of India (RBI) said in a report last week that our economy is on the path of recovery. Recent evidence supports its claim. Our services sector Purchasing Managers’ Index (PMI) released Tuesday climbed to 59.2 in June, its highest level in 11 years. Levels above 50 indicate expansion in activity, while anything below indicates contraction.
Since services constitute a large part of our economy’s output, the survey findings suggest good news. After a prolonged shutdown due to rising costs for consumers, Indian service businesses significantly increased prices last month. This did not put off consumers and orders remained strong, indicating that there has been a decent growth in demand. If this persists, it could help drive the economy’s post-Covid recovery. The manufacturing sector has been comparatively less upbeat, according to its PMI reading, which fell to 53.9 last month. But then, with the supply chain recovering and the mood starting to improve as chip shortages in key sectors such as automobiles, manufacturing prospects should look as well. Inflation is certainly a threat. But with economic growth on a strong recovery path, RBI may move decisively to contain it.