RAS question
Purchasing Managers' Index (PMI) above 50 indicates:
Correct answer: (C) Expansion in economic activity.
A Purchasing Managers' Index reading above 50 indicates expansion in economic activity.
Explanation
PMI is read against the neutral mark of 50: above 50 signals expansion, below 50 signals contraction, and exactly 50 means no change. ISM's March Manufacturing PMI material states the same threshold rule: a Manufacturing PMI reading above 50 indicates that the manufacturing economy is generally expanding, while a reading below 50 indicates decline. That is why option C is the only correct choice. A PMI above 50 is a positive activity signal, not stagnation or recession. For India, PMI is compiled by S&P Global for the manufacturing and services sectors, and RAS questions use it as a leading indicator because it shows the direction of economic health.
Why the other options are wrong
- (A) Stagnation fits a PMI reading of exactly 50, because that mark denotes no change rather than expansion.
- (B) Recession is not implied by a PMI above 50, since the above-50 side of the scale is the expansion side.
- (D) Contraction in economic activity is indicated by a PMI below 50, not by a reading above 50.
Concept
This tests economic indicators and the threshold logic used to classify an index reading as expansion, contraction or no change. It recurs in RAS because PMI is a standard leading indicator of economic health.