The Signal (weekly highlights)

1. Services PMI jumps to 57.9 in April 2022

The seasonally adjusted S&P Global India Services PMI jumped to 57.9 in April 2022 from 53.6 in March 2022. This is the highest rate of expansion reported by the index in the last five months. An index reading above 50 denotes expansion and below 50 denotes contraction.

The lifting of Covid-19 restrictions led to greater consumer footfall and a general improvement in demand. Sales grew at their fastest pace since November 2021. Inflationary pressures continued and service providers lifted their selling prices to pass on this burden to the end users. Inflation concerns dampened the business confidence compared to the preceding month, although it still remains positive.

2. Repo rate hiked by 40 bps

The Monetary Policy Committee (MPC), on 4 May 2022, announced;

• to increase the policy repo rate under the liquidity adjustment facility (LAF) by 40 basis points to 4.40 per cent
• to raise the standing deposit facility (SDF) rate by 40 basis points to 4.15 per cent. CRR raised by 50 bps to 4 percent
• consequently, the bank rate and the marginal standing facility (MSF) rate stand adjusted at 4.25 per cent each.

The MPC decided to remain ‘accommodative’ while focusing on withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth. The medium-term target for consumer price index (CPI) inflation is four per cent with up to two per cent deviation allowed on either side

3. Exports up 24.2%, imports up 26.5% in April 2022

India’s merchandise exports rose year-on-year by 24.2 per cent to USD 38.2 billion in April 2022. POL exports rose by 113.2 per cent to USD 7.7 billion, and non-POL exports rose by 12.3 per cent to USD 30.5 billion in April 2022.

Exports rose in April on account of healthy performance by sectors like petroleum products, electronic goods and chemicals, even as trade deficit widened to USD 20 billion during the month. Highest-ever exports of over USD 38 billion, during the first month of the fiscal, shows the continuous impressive performance of the exports sector.

4. Passenger vehicle sales in April 2022 impacted by supply chain constraints

Passenger vehicle wholesales in April 2022 have been impacted by supply chain constraints. Maruti Suzuki India reported 10 per cent y-o-y decline in domestic sales during the month. Hyundai Motors India also reported a 10 per cent decline in sales in April 2022. Sales of Honda Cars India and MG Motor India fell by 13.2 per cent and 21.7 per cent, respectively.

This continued to witness supply side constraints for the passenger vehicle makers, despite good demand. The two-wheeler segment, however, has shown signs of recovery with a double-digit y-o-y growth, driven by uptick in motorcycle business. Three wheelers, commercial vehicles and tractors segments remain positive.

5. Manufacturing PMI rises to 54.7 in April 2022

The seasonally adjusted S&P Global India Manufacturing Purchasing Managers’ Index (PMI) rose to 54.7 in April 2022 from 54 in March 2022. This was the tenth consecutive month of expansion. A PMI reading above 50 denotes expansion and below 50 denotes contraction.

New orders and production growth gathered pace as removal of Covid-19 restrictions continued to support demand pick-up in the domestic market. International sales too put up a robust growth in April 2022. Inflationary pressures increased in April 2022. While input prices increased at the fastest pace in the last five months, final product price inflation surged to a 12-month high.