The Indian growth story update.

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Not employment, it's unpaid employment now.
Growth decelerating in both manufacturing and services.

The Indian growth story, on which station has it come to a halt?

Recent statements by politicians give a positive outlook, conveying everything's going well.....but is it?

Instead of getting lost in the noise of political rhetoric, let’s dig into what really matters—the facts.

1. Production:  The HSBC final India Manufacturing Purchasing Managers Index (PMI), compiled by S&P Global, stood at 56.5 in September, down from 57.5 in August and 58.1 in July (8-month low). However, the index is still in the expansion category (above 50). The index is based on responses to questionnaires sent to around 400 manufacturers.

2. Services: The HSBC India Services PMI fell to 57.7 in September from 60.9 in August. (10- month low). Major services firms, however, saw solid job creation, and strengthening of business confidence. Falling from 60.9 in August to 57.7, the headline figure signalled a softer albeit still historically robust rate of expansion, the survey said.

3. Employment: India’s annual unemployment rate was flat between 2022-23 and 2023-24 at 3.2%, the lowest this number has been since 2017-18 in the Periodic Labour Force Surveys (PLFS).

Composition of Labour Force - 2023-24 (2017-18)

Salaried - 21.1% (21.5%)
Self-Employed - 56.6% (49.0%)
Casual Labour - 19.2% (23.4%)
Unemployed - 3.2% (6.1%)

Here's a catch - Unpaid Employment
You can see the biggest jump in the self-employed category.
Share of self-employed-unpaid family workers in the labour force - 18.8% (2017-18 - 12.8%, a 1.5x increase)
Do note that the majority of the above number includes unpaid employment in Agriculture. (Recall disguesed unemployment, we studied at school.)

Growth drivers:

1. Consumption: Particularly in the ongoing Festive Season, producers have stocked up and expect massive sales during the festive season. Rural consumption is expected to provide a massive boost due to the shift of government focus and above-average rainfall. 

2. Interest rate - Pressure is building on the central bank to cut interest rates which have remained unchanged for more than a year with Fed cutting the rates by 50 Bps last month.

Short to medium-term challenges 

1. Outflow of FPI money from India, particularly to China after targeted government interventions, including a stimulus to boost consumption, revive the real estate sector, and stabilise the equity markets.

2. West Asia conflicts can negatively impact the Indian economy - Global instability, increase in Crude prices, decrease in exports, interrupting the India Middle-East Europe Economic Corridor development.

Festive Consumption and Monetary policy are expected to press the next button for the next station now, which may help the Manufacturing and Services PMIs to gain strength and generate employment, aided by required government support.

Sources: 

https://www.livemint.com/economy/manufacturing-pmi-september-manufacturing-activity-hsbc-india-pmi-new-export-orders-factories-rbi-inflation-11727762208552.html

https://www.livemint.com/economy/india-pmi-service-sector-growth-manufacturing-economy-international-orders-business-confidence-gdp-11728035620183.html

https://www.livemint.com/economy/india-pmi-service-sector-growth-manufacturing-economy-international-orders-business-confidence-gdp-11728035620183.html


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