Indian Rupee: PMIs show growth and inflation risks – Commerzbank
Commerzbank’s India section notes September flash PMIs pointing to stronger end-Q3 activity, with both manufacturing and services indices well above 50. Domestic demand is robust, but elevated input and output prices, especially in manufacturing, keep upside inflation risks high.
Commerzbank's India division reports September flash PMIs indicating stronger end-Q3 activity, with manufacturing and services indices well above the 50 threshold. Domestic demand remains robust, but high input and output prices, especially in manufacturing, keep inflation risks elevated. The bank anticipates the RBI to remain cautious and in a wait-and-see mode, while the USD/INR is supported by global dollar strength and portfolio outflows.
The September manufacturing PMI rose to 55.7 from 52.8 in August, marking its highest level in seven months. The services PMI increased to 55.8 from 54.1 in August, reaching a three-month high, but is below its May 2026 peak. Despite stronger new orders in manufacturing and services, growth in new export orders eased, lagging behind manufacturing.
The September PMIs suggest economic activity rebounded at the end of Q3, driven by resilient domestic demand, but elevated price pressures in manufacturing indicate persistent upside inflation risks. While year-to-date CPI inflation has averaged 3.8%, below the RBI's FY2026-2027 forecast of 5.0%, cost pressures suggest policymakers will likely maintain a cautious stance, keeping the RBI in a wait-and-see mode.
USD/INR rose 0.2% to 95.93, supported by broad USD strength and foreign portfolio outflows, while RBI Deputy Governor Poonam Gupta argued that there is a case for INR appreciation.
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