Finally some good news is coming for Prime Minister Narendra Modi with Union Finance Minister Nirmala Sitharaman from the world of economy. Manufacturing, consumption and employment generation substantially up in January 2020. (Photo: PTI file)

There is suddenly buzz around Indian economy, once again. A survey has shown that monthly manufacturing activity for January has suddenly shot up to an eight-year high in India.

This is remarkable in the sense that it definitely conveys that their is strong demand surge at the factory gates. This means consumption, which had been lying laggard, has spiked in India. Continued low consumption was being held responsible for longish economic slowdown in India.

Now, the Nikkei India Manufacturing Purchasing Managers' Index (PMI), prepared by IHS Markit, rose from 52.7 in December 2019 to 55.3 in January 2020.

PMI is a key to understand manufacturing activity. A PMI in excess of 50 indicates expansion in manufacturing activity. The surprise improvement has been attributed to spike in demand.

The main pull force is consumer goods segment. But the real good news could be in expansion in capital goods segment indicating that investments in Indian economy might just have revived.

This comes on the back of the Economic Survey and Union Budget presented last week. Both projected a rather higher than expected GDP growth rate for 2020-21 at 6-6.5 per cent. Experts called the projection too optimistic and ambitious.

India Ratings (Ind-Ra), the arm of ratings agency Fitch, actually downgraded corporate credit rating for Indian companies. This came after Union Finance Minister Nirmala Sitharaman presented her Union Budget 2020. The ratings agency predicted a growth rate of 5.6 per cent for 2020-21. Its projection for 2019-20 is 4.6 against government's 5 per cent.

India Ratings assessment is in the line of the International Monetary Fund's (IMF) estimates of India's economic growth. The IMF sees India growing at 5.8 per cent in 2020-21 and predicts that a 6.5 per cent growth for India is possible only in 2021-22.

Both the Fitch and the IMF seem to be worried over India breaching the fiscal deficit target. Sitharaman pegged the fiscal deficit for the current year at 3.8 per cent and estimated that it would be 3.5 per cent in 2020-21. Higher fiscal deficit target practically makes doing business in the country costlier and hence difficult.

However, the surprise from the manufacturing sector may soothe the nerves of the government. PMI for January stands at the highest since February 2012. Simply put, sales have gone up and there is upsurge in job market. The survey found that hiring of new workers saw a sharp push -- the fastest rate in seven years. This is mainly on the account of growth of new businesses.

There is more. Exports have seen a spurt. PMI indicators show that fresh export orders have risen at the fastest pace since November 2018. Exports drive has come from rising demands from consumers in Asia, Europe and North America.

But good news does not end here. Crude oil prices have fallen and the BSE Sensex recovered from the budget-day shock and rebounded to end higher on Monday, and opened with fresh upward push on Tuesday.

However, this does not mean that economic slowdown is conclusively over. Market watchers and agencies, such as Fitch and IMF, are still cautious.