Is the job drought about to end?
The rise in the employment index indicates new hiring as larger companies adapt to the new tax regime
The private sector expanded a bit in September after two months of contraction, as the Nikkei India Composite PMI (Purchasing Managers’ Index ) Output Index rose to 51.1. The composite index, which tracks both manufacturing and services sectors, is an indicator of private sector economic activity in the country. A reading above 50 indicates expansion, while one below 50 points to contraction.
Regaining some lost ground since the implementation of the goods and services tax in July, both manufacturers and service providers saw higher output and new business.
Though the improvement was slight, services sector output rose for the first time in three months. As a result, the seasonally adjusted Nikkei India Services PMI Business Activity Index rose from 47.5 in August to 50.7 in September.
But perhaps the most interesting part of the survey was that both manufacturing and services sectors increased hiring. For the services sector, the rate of employment growth was the strongest since June 2011, while for manufacturing it was the fastest since October 2012. Does this finally reverse the much-written-about job drought?
According to Aashna Dodhia, an economist at IHS Markit and author of the report, “The labour market was strengthened over the month as the pace of job creation quickened to the fastest since mid-2011, led by the transport and storage and consumer services sub-sectors.”
It’s likely that after contracting in the previous months, the rise in the employment index indicates new hiring as larger companies adapt to the new tax regime. The pace of job creation isn’t very strong and it remains to be seen if it is sustainable. Nevertheless, it does provide a glimmer of hope.
Note, however, that this survey is of large companies and hence is not representative of the small-scale sector or the informal economy, which is where the jobs for the masses are.