Role of PMI on GDP with reference to post GST Indian scenario

Abstract

Macro-economic forecasting in India became more scientific and accurate with the advent of the Purchase Manager Index, Particularly in the manufacturing sector. Since the index considers all forms of inventory build-up from the raw material purchased to final factory output, it was considered more revealing as compared to Index of Industrial production that considers only factory output. The monthly data of PMI is more indicative of the future outlook for the manufacturing sector and the country’s GDP and renders prediction easy and precise. This study explores the pattern of secondary data drawn from PMI and IIP over a period of eight quarters to forecast GDP of India by forecasting PMI. The presuppose link between PMI and GDP is leveraged to anticipate-possible GDP for FY 2018-19 using multiple regression and time series method. The study revealed a strong positive relationship between GDP and PMI but surprisingly none-to-close relationship between IIP and GDP.