Budget 2024: Will India’s robust manufacturing segment sway Sitharaman’s decisions? A look at PMI numbers

Nirmala Sitharaman’s upcoming Budget is likely to take into account India’s robust manufacturing PMI readings. Strong manufacturing continues to support India’s stellar economic growth. The latest GDP print available for Q4 and FY24 also points to the robustness of manufacturing and is a testament to the government’s efforts to put India on the manufacturing map of the world.

The Purchasing Managers Index for manufacturing, an indicator to gauge the health of the sector, has shown strong growth and continues its upward march. The latest flash PMI data points towards a revival from a drop witnessed in May mainly due to the impact of heatwaves. The HSBC Flash PMI rose to 58.5 in June from 57.5 in May.

The growth is seen not just in the manufacturing pack alone. Services PMI helped in taking the overall headline index to 60.9 in June from 60.5 in May.

The strong PMI numbers signal the strength of the business environment amid continuing global uncertainties and interest rates that continue to remain high as the RBI leaves no stone unturned in its fight to stamp out inflation.

The fourth quarter GDP growth beat all estimates and came in at 7.8 per cent boosted by both the manufacturing and services sector. This took the overall economic growth for the fiscal FY24 to 8.2 per cent surpassing RBI’s estimate of 7 per cent and NSO’s second advance estimate of 7.6 per cent.
Manufacturing grew at a rapid clip of 9.9 per cent in FY24 compared to -2.2 per cent last year. FM Sitharaman called it a triumph of the Modi government’s efforts for the sector

"It is worthwhile to note that the manufacturing sector witnessed a significant growth of 9.9 per cent in 2023-24, highlighting the success of the Modi government’s efforts for the sector. Many high-frequency indicators indicate that the Indian economy continues to remain resilient and buoyant despite global challenges. India’s growth momentum will continue in the third term of PM Shri @narendramodi-led government,” Sitharaman posted on X (formerly Twitter) after the numbers were released.

As the government gears up for a full Budget 2024, existing policies in taxation, investment incentives, and welfare programs will play a critical role. The principle of continuity and strategic realignment is likely to guide budgetary decisions, ensuring a seamless transition while addressing evolving economic demands.

With a coalition government now in place, the budget will need to balance growth objectives with coalition partners' priorities, aiming to maintain economic stability and foster development.

Sitharaman is scheduled to present her seventh Budget in July 2024, marking the first full budget of the newly formed Modi 3.0 government.

The budget holds significance as it will be the first under a coalition setup, following the BJP's failure to secure a majority in the recent elections.