Sentiments improve somewhat on manufacturing and services: Survey

Inflation continues to be a big challenge

June 27, 2022 3:20 IST | India Infoline News Service

The pent-up demand for services and increased production from the industry as pandemic restrictions were lifted continued to fuel India's economy's growth in May.

The needle on a dial measuring so-called "Animal Spirits" moved up from 5 to 6 for the first time since July and the first time in more than a year as five of the eight high-frequency indicators collated by Bloomberg News improved. To reduce volatility in the single-month readings, the gauge is based on the three-month weighted average scores.

An increase in services activity and a strong increase in essential infrastructure industries were the driving forces behind the upturn. However, a historic increase in input costs, partly brought on by Russia's invasion of Ukraine and an NSE 5.87 percent supply-demand imbalances, might dampen optimism moving forward.

Global central banks are being forced to choose price stability over growth due to rising prices for food, fuel, labour, and transportation. In an effort to lower price increases below its goal maximum of 6%, the Reserve Bank of India has increased borrowing prices by 90 basis points so far this year.

The recovery might also be hampered by unpredictable weather and an increase in viral infections. In the past month, there has been an almost sixfold rise in daily viral cases.

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