It may not yet be time to distribute sweets to celebrate the uptick in manufacturing activity in December — the fastest in five years, as we should see if it’s sustainable over months or just a flash in the pan. Sceptics say this growth is just a rebound from the disruption and uncertainty created by demonetisation and the hasty introduction of GST, as manufacturers waited for clarity before restocking and making new purchases. This isn’t the big picture though.
Manufacturing got a push from strong demand as more people got jobs in this period. Statistics show job creation grew the fastest since August 2012. This must be music to the ears of Prime Minister Narendra Modi. He promised jobs and people had begun holding him to it.
The number of jobs created may not be close to the 10 million jobs he promised in five years, but it could be a beginning. Purchasing power of consumers fuels demand, that leads to manufacturing growth. Also, the uptrend could mean the huge setback caused by demonetisation exercise and GST’s hasty introduction has been overcome. It brought down GDP to 5.7 per cent in the June quarter. The 6.3 per cent GDP growth in 2018’s second quarter comes after five quarters of low growth, from a nine per cent high in 2016 fourth quarter.
Export growth at a six-year high amid a global economic revival also pushed up domestic manufacturing as export fuels growth as significantly as domestic demand. The government must now build on this and create an environment that further spurs growth engines.
