Markets
Business activity has recovered, but what about jobs?
Summary
Though the jobless rate has fallen to pre-covid levels, the number of people employed is below Jan ’20 levelBusiness activity in India’s manufacturing and services sectors continues to recover with the gradual reopening of the economy and the rising pace of vaccinations. The latest Purchasing Managers’ Index (PMI) survey published by IHS Markit showed that the seasonally adjusted India Services Business Activity Index stood at 58.1 in November, a marginal decline from 58.4 in October. A reading above 50 indicates expansion and below the threshold points to contraction.
Manufacturing PMI for November also pointed to a robust recovery. The combined improvement in both these sectors has resulted in the Composite PMI Output Index rising to 59.2 in November from 58.7 in October. The survey report said that this is the strongest upturn in the Composite PMI since January 2012.
“Aggregate new business rose for the fourth month in succession and at the fastest pace in almost 10 years. The pickup in growth stemmed from the manufacturing industry, as sales among service providers increased at a pace that was little changed from October," said the PMI survey report.
Private companies operating in both the sectors continue to tackle input cost inflation by raising prices gradually. As firms are yet to pass on the entire burden of cost pressures, inflation remains a concern and continues to weigh on their business confidence.
Another pain point remains the muted employment trends despite the headline indices showcasing revival. According to the report, on a combined basis, private sector employment increased only slightly in November.
Unfortunately, the outlook on this front is bleak. After-effects of the pandemic on the labour markets and incomes are likely to be felt for longer than the revival in other cyclical economic activity, cautioned economists at DBS Bank.
“Improvement in hiring has also been lopsided, as few cyclical sectors fare better than the rest, such as ITES/computer software sectors. Elsewhere, with more than two-thirds of the work force being self-employed and casual labour, dependence on regular employment (as most are without social/protection benefits) is high," the Singapore-based bank said in a report on 2 December. The report said that though the unemployment rate has fallen to pre-covid levels, the total number of people employed is below January 2020 levels, with the urban sector faring a shade better than rural.
This is not unique to India, but peers and emerging and developed nations are yet to see a meaningful improvement in employment data.
As such, RBI’s consumer confidence survey to be released on 8 December can be expected to throw more light on the situation.
