1. PMI stands for Purchasing Managers' Index. 2. [India PMI®](https://www.pmi.spglobal.com/Public/Release/PressReleases?language=en) is compiled by S&P Global from responses to questionnaires sent to survey panels of around 400 manufacturers and 400 service providers ### Manufacturing 1. HSBC India Manufacturing Purchasing Managers’ Index™ (PMI) is created from topics that S&P Global asks managers about every month. In total, they monitor 12 individual variables. Each of these 12 variables produces its own standalone sub-index. 2. They are: Output, new orders, new export orders, backlogs of work, stocks of finished goods, employment, quantity of purchases, suppliers' delivery times, stocks of purchases, *input prices, output prices*, future output. 3. The main headline Headline Manufacturing PMI number is created from only 5 out of this 12 variables. So it is a weighted index built from: New Orders (30% weight), Output (25% weight), Employment (20% weight), Suppliers' Delivery Times (15% weight), and Stocks of Purchases (10% weight). $\text{Headline PMI} = (0.30 \times \text{New Orders}) + (0.25 \times \text{Output}) + (0.20 \times \text{Employment}) + (0.15 \times \text{Delivery Times}) + (0.10 \times \text{Stocks of Purchases})$ 4. Other 7 Variables - They are still tracked, including **Input Prices** and **Output Prices** and reported every month as individual sub-indices in the same document. 5. A level of 50 corresponds to no change in activity, and a reading above 50 denotes expansion and vice versa. ### Services 1. The index is HSBC India Services PMI/Services PMI/Business Activity Index/ Services PMI Business Activity Index - All are same. 2. Example: India Services PMI slowed to 53.1. It means service sector output/volume grew at a slower pace. It is a volume/activity metric. It is a diffusion index calculated from a question that asks for changes in the volume of business activity compared with one month previously. And prices are tracked separately as underlying sub-indices. 3. The following variables are monitored - Business activity, new business, new export business, outstanding business, employment, *input prices, prices charged,* future activity ### Composite 1. HSBC India Composite PMI - both sectors are combined. It is a weighted average of the Manufacturing Output Index and the Services Business Activity Index. But why the Composite Index uses the Output Index instead of the Headline PMI? 1. The Composite Output Index is designed to measure one precise thing across the entire economy, that is total production/volume. To do this cleanly, S&P Global separates the "volume of output" from both sectors, that is, Manufacturing Output Index (Production volume in factories), and Services Business Activity Index (Output volume in service firms). 2. If it used the headline Manufacturing PMI instead, it would be including non-volume variables like supplier delivery times and inventory stocks into a figure that is strictly meant to track output/volume. ### Diffusion Indexes 1. All these indexes are diffusion indexes. 1. The indices vary between 0 and 100, with a reading above 50 indicating an overall increase compared to the previous month, and below 50 an overall decrease. 2. The indices are then seasonally adjusted 2. $\text{Diffusion Index} = (\text{\% reporting Higher}) + 0.5 \times (\text{\% reporting Same})$ 3. Example: PMI Output Prices Index 1. Because it is a diffusion index, the Output Prices number tells you about breadth and direction, not the exact rate of inflation. 2. Output Prices Index = 56.0. More companies raised prices than lowered them. Selling prices are increasing overall (inflationary pressure). 3. Output Prices Index = 50.0. Prices across the sector are unchanged on average. 4. Output Prices Index = 44.0. Prices are falling across the sector (deflationary pressure) ### PMI in RBI's Report 1. A sample usage of these numbers in the article [State of the Economy in RBI Bulletin July 2026.](RBI_Monthly_Bulletin_Article_202607_State%20of%20the%20Economy.pdf#page=21&selection=17,0,31,26)