There is little to celebrate over the purchasing managers’ index (PMI) for manufacturing hitting a 22-month high in October as it only reflects the order book position of various companies. These orders will have to be translated into production to become truly positive news. Till then, it’s only intention. Manufacturing, the key ingredient for job generation, is yet to pick up, and it’s hoped the festive season will provide a booster dose. What we see today is the disturbing phenomenon of jobless growth. It will be a slow process as private investment is still not taking place.
The government’s expenditure is limited to Rs 1.4 lakh crore, so there’s hardly any extra impetus it can offer to spur growth. It must be said to the government’s credit that it’s providing an enabling business environment, but much more needs to be done to encourage companies in the new economy or e-commerce as they generate jobs. The new economy will also give entrepreneurs a boost, particularly small and medium industries that are major job generators. They need capital which the government has to facilitate as banks are risk-averse about MSMEs.
One reason for slow private sector investment is that there is still surplus capacity that has to be absorbed before anyone invests in expansion. The answer is to put more purchasing power in the hands of people by investing in healthcare and education, that will boost the services sector. The government’s record in health and education in rural India is poor, and corruption-riddled, so private investment is desperately needed.
