Mfg PMI surge to be short-lived

Temporary cheer?

- Harsha Jethmalani

Mid the US tariff-led gloom, robust business momentum in India's manufacturing sector, captured by the Purchasing Managers' Index (PMI), can seem comforting.

The seasonally adjusted HSBC India Manufacturing PMI surged to a 17.5-year high of 59.3 in August from 59.1 in July, driven by rapid production growth. A figure above 50 signals expansion.

But market participants should not get complacent as this cheer is most likely to be short-lived. The adverse impact of the latest 50% tariff levied by the US on Indian goods is expected to be felt from September.

PMI's New Export Orders index eased to a five-month low in August. Labour-intensive sectors such as textiles, gems and jewellery, household items and seafood would feel the heat as demand prospects dim if no bilateral agreement is reached. This may have a domino effect on jobs, wages, private consumption and, thereby, tarnish business confidence.