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>>India's PMI shows unexpected strength, with solid economic data supporting the rupee despite broader market weakness, according to Commerzbank.

India's PMI shows unexpected strength, with solid economic data supporting the rupee despite broader market weakness, according to Commerzbank.

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about 6 hours ago

PMI Strength

India’s composite PMI hit 58.7 in February 2025, marking 24 consecutive months above the 50‑point expansion threshold. Manufacturing rose to 59.2 and services held at 58.4, far ahead of the global average of 52.1. New‑orders climbed to 60.1 and the employment index rose to 54.8, the strongest run since the 2008 crisis.

Currency Paradox

Even with robust PMI, the rupee slipped 4.2% against the dollar year‑to‑date, lagging peers like the rupiah and peso. Higher U.S. rates spurred $3.2 bn net portfolio outflows in Jan‑Feb 2025, while the trade deficit widened to $22.8 bn. Rising imports of energy and capital goods offset gains from a 14.3% rise in services exports.

Economic Mechanisms

Commerzbank finds each one‑point PMI increase trims rupee volatility by roughly 0.8%. Strong PMI bolsters fiscal revenues, attracts foreign direct investment and lowers country‑risk premiums. Services, contributing 55% of GDP, provide a structural buffer when manufacturing slows globally.

Outlook

Future‑output readings hit 64.2, and business confidence remains high, supporting continued expansion into mid‑2025. The RBI’s steady repo rate of 6.5% creates a “fundamental floor” for the rupee around 83.5 per dollar. External factors such as oil prices and U.S. monetary policy will still shape short‑term moves.