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Four Factors That May Impact India’s Projected Economic Growth of 6.5% in FY24

Taniya Roy

India is projected to record an economic growth of 6.5% for the fiscal year 2023-2024. However, four factors – declining manufacturing activity, a slowdown in the services sector, rising unemployment, and air pollution – may have the capacity to impact this projected target.

PMI services at a seven-month low

India’s services sector experienced a slowdown in October, with the Purchasing Managers’ Index (PMI) dropping to a seven-month low of 58.4 from 61 in September, according to a private survey.

The survey has attributed this decline to reduced demand, price pressures, and competitive conditions.

The survey polled around 400 companies in non-retail consumer services, transport, information, communication, finance, insurance, real estate, and business services.

It noted, citing anecdotal evidence, that while growth has been weakest since May, it has remained substantial, driven by customer interest and successful advertising. It added that fierce competition and subdued demand for certain types of services dampened the overall expansion.

Pollyanna De Lima, economics associate director at S&P Global Market Intelligence, said the Indian service economy continued to register impressive growth, despite the increase in business activity and new work intakes softening from September’s over 13-year highs, Business Standard reported.

“Several companies managed to secure new contracts, but some mentioned subdued demand for their services and competitive conditions. Exports were an area of particular strength in October, with new business gains from Asia, Europe, and the US boosting growth to its second-highest in the series over nine-year history,” she added.

Manufacturing activity falls to an eight-month low

The slowdown in the services growth follows the decline in manufacturing activity in the last month.

Rising cost pressures and a decline in demand for consumer goods dragged down manufacturing activity in October, which grew at the slowest pace in eight months.

A recent Reuters poll showed demand during the festive season would bring some cheer to the economy, however, it would not be enough to ramp up the speed of economic growth.

Pollyanna De Lima, economics associate director at S&P Global Market Intelligence, noted, “India’s manufacturing sector generated substantial growth in October, despite a challenging global economic environment.”

“Still, insights from surveyed purchasing managers pointed to the deceleration of several measures.”

The slowdown in both manufacturing and services indicates low production and productivity. That could mean that fewer goods are being produced and fewer jobs are being offered.

Unemployment at a two-year high

Separately, India’s unemployment rate rose to a two-year high of 10.09% in October, Bloomberg reported citing data from the Centre for Monitoring Indian Economy (CMIE).

However, the Periodic Labour Force Survey (PLFS) data for July 2022 to June 2023 showed that India’s unemployment rate for individuals aged 15 and above has reached a six-year low, standing at 3.2%.

According to the PLFS data, a larger number of individuals are self-employed than those in casual labour and the regular salaried class.

“The share of self-employed [people] in the total workforce is increasing, and within that most of the increase can be seen among unpaid family labour and own account workers,” Santosh Mehrotra, professor of economics, Centre for Informal Sector and Labour Studies, School of Social Sciences, Jawaharlal Nehru University, told The Wire.

He explained that people are choosing to be self-employed, because of a lack of good work and wages.

Economists have come to rely on CMIE data for a better assessment of the labour market as its figures are based on monthly surveys as opposed to government data, which releases country-wide data less frequently, Bloomberg’s report said.

In May, CMIE chief Mahesh Vyas had told The Wire that India’s workforce is not rising in relation to its increasing working age population. He added India’s workforce has largely remained stagnant at a little over 400 million in the past five years, and that the quality of jobs in India is very low.

All these factors can have an impact on the Indian economy which is projected to rise by 6% to 6.5% this year.

Air pollution

“Air pollution has a direct, and a particularly debilitating impact on GDP growth and per-capita income levels by way of reduced worker output, lower consumer footfall in consumption-led services, hampered asset productivity, and a surge in health expenses and welfare allocations, especially in the productive age groups,” the Indian Express reported.

When we consider the consequences of recurring annual pollution cycles in key manufacturing and service centers, the strain on economic productivity becomes considerably more significant, the newspaper said.

A World Bank paper said there’s clear evidence that “the well-documented micro-level impacts of air pollution on health, productivity, labour supply, and other economically relevant outcomes aggregate to ‘macro level effects that can be observed in year-to-year changes in GDP’.”

“The effect is non-trivial – the median annual increase in the level of PM2.5 reduces year-to-year changes in gross domestic product by 0.56 percentage points,” the report said.

The Indian Express quoted an RBI report saying that the trend is a concern because in India, employment generation is still largely linked to economic activities involving the outdoors, such as in agriculture and construction. These two are among the biggest employment generation sectors. Delivery services and security agency work also account for the bulk of employment generation options in the urban areas, it said.

However, the impact of air pollution is not restricted to those working outdoors. “Even in indoor jobs such as those in call centres, air pollution takes a toll on productivity,” it said.

(Courtesy: The Wire.)

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With Job ‘Mahakumbha’, Nitish Kumar Foregrounds Importance of Promises Kept

Nalin Verma

Bihar chief minister Nitish Kumar and his deputy Tejashwi Yadav handed out appointment letters to over 25,000 newly recruited teachers in a mega event in Patna on Thursday (November 2).

Similar events were organised in district centres, where ministers and administrative authorities gave out appointment letters to over a lakh new recruits in various teaching positions.

The event was organised at a grand scale by the Bihar government in what was a clear attempt by Nitish Kumar to set the political narrative around job creation – an issue where the Narendra Modi-led Union government has scored poorly.

At the same time, the event also marked the partial fulfilment of Tejashwi Yadav’s poll promise to generate more than 10 lakh jobs.

By all accounts it was unprecedented – no state government in independent India’s annals had given out over 1.20 lakh jobs in one day.

The newly recruited teachers include 70,545 primary school teachers, 26,089 secondary teachers and 23,702 higher secondary or plus-two teachers. As many as 57,854 women teachers constitute 48% of the total number of people recruited.

The Nitish Kumar government has reserved 35% seats for women in the state.

Bihar also has the highest number of women in its police forces in comparison to other states.

While the chief minister, his deputy Tejashwi Yadav and education minister Chandrashekhar gave letters of appointment to about 25,000 youths at Patna’s Gandhi Maidan, the ministers in charge and district magistrates concerned distributed the same to youths in the state’s 37 other districts.

“It was a mela (fair)-like atmosphere in Gopalganj. The job recipients were happy and so were their family members”, said Rajan Gupta, a Hindi-language journalist at the Gopalganj district headquarters in north Bihar.

He added: “The exercise will have a cascading impact on crores of people in the state and beyond.”

It is clear that the Bihar government is focusing on foregrounding its government jobs push in the background of Prime Minister Narendra Modi failing on his promise to give 1.5 crore jobs per year, which he made ahead of the 2014 general elections.

Speaking at a Communist Party of India rally ahead of the job event, Nitish took a dig at the media.

“The newspapers ignore our performance. They won’t give due space to today’s event of giving over 1.20 lakh jobs, but will amplify insignificant works of [the Narendra Modi government],” he said.

“They [the BJP] have captured the media. We, under the banner of the Indian National Developmental Inclusive Alliance (INDIA), are working to free the media too … the media will have its freedom back when we are in power.”

The BJP criticised the exercise. “The Janata Dal (United) and the Rashtriya Janata Dal (RJD) are locked in the battle to take credit. Over 30,000 non-Biharis have got jobs at the cost of Bihar’s youths”, senior BJP leader Sushil Kumar Modi said.

Other saffron leaders alleged “irregularities” in the exercise.

Tejashwi Yadav said, “What will the BJP say? The PM has miserably failed on his promise of giving jobs. They [the BJP] are not talking about their leader’s jumlabaji (false promises) and inability to deliver goods. They stand exposed.”

The exercise to give appointment letters involved participation of the Bihar Public Service Commission (BPSC) and the education department and took six months.

Additional secretary of the education department and professor K.K. Pathak (IAS) was also involved in the preparations for the job event.

Background

From 2007 to 2020, Nitish’s government is learned to have given appointment letters to five lakh youths, mostly as teachers, but it never in one go and reflected many discrepancies at various stages.

This is the first time that the BPSC – that employs deputy collector-level officers – has recruited teachers adopting rigorous competitive exams.

In the background of what the common people describe as the job mahakumbha in the state is Tejashwi Yadav’s promise during the 2020 assembly elections that he would give 10 lakh jobs to the youth if his party came to power.

His RJD was in the opposition then against the JDU-BJP combine. The RJD emerged as the single largest party in 2020. It failed to replace the JDU-BJP combine by a whisker.

But his promise of employment was believed to have helped Tejashwi emerge as the leader of the youth in his own capacity.

He then joined the Nitish-led mahagathbandhan government in August 2022.

Inspiration from Karpoori Thakur

Karpoori Thakur, mentor of Nitish Kumar and Lalu Prasad Yadav, had set an example of giving jobs in one go when he was Bihar chief minister in the 1970s.

On January 26, 1979, Thakur had given jobs to 6,700 engineers in one ago by organising a camp near the Bihar secretariat.

It was a big number at that stage of history. There were only a few engineering colleges in the state. Many students had participated in the Jayaprakash Narayan (JP)-led movement that paved the way for Thakur to replace the Congress government in the state in 1977.

The Congress government had not appointed engineers for a long time, leaving a large number of engineering graduates unemployed.

Thakur had become a hero of the youth by giving them jobs. Nitish Kumar too was an engineering graduate who could have easily got a job at that time. But he was a front-running activist of the JP movement.

He tore his engineering degree at the same Gandhi Maidan to dedicate himself to the service of the people during the JP movement.

(Nalin Verma is a senior journalist, author, media educator and independent researcher in folklore. Courtesy: The Wire.)

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In another article published in Newsclick on October 28, “Employment Versus Hindu-Muslim Politics”, Nalin Verma adds (extract):

While the Bihar government is gearing up to give appointment letters to 1,22,324 newly-appointed teachers on November 2, “lynching, Hamas-Israel war and Mughals”, among other polarising rhetoric, constitutes the theme of the Union Home Minister Amit Shah’s campaigning in the election-bound states.

Bihar Chief Minister Nitish Kumar, Deputy Chief Minister Tejashwi Yadav and their Cabinet colleagues will hand over job appointments to over one lakh youth at Patna’s iconic Gandhi maidan in what the BBC has described as a “Mahakumbh”—the first of its kind event of job appointments on such a massive scale in the annals of independent India.

On the other hand, on October 16, Shah—the spearhead of the Bharatiya Janata Party’s election campaign—accused the Bhupesh Baghel government of “lynching” of a Hindu youth while electioneering at Rajnandgaon in Chhattisgarh. The youngster was killed in a communal clash in April, and Shah declared that the BJP would field his father from the Saja Assembly seat to avenge his death.

The Congress party has complained to the Election Commission about Shah’s “baseless accusations” and said they aim to whip up communal sentiments, but Shah, during his whirlwind tours in Chhattisgarh and Madhya Pradesh, talks about how the Congress’s “appeasement [of Muslims and other minorities] and insults to Sanatan dharma have weakened Bharat”.

Unlike Karnataka, Telangana, Bihar, West Bengal and Uttar Pradesh, the Muslims don’t have an effective population in Chhattisgarh and Madhya Pradesh. The two states are also not known for communal clashes on a large scale. But Shah has, repeatedly been accusing the Congress of “favouring” “Mughalon ke vanshaj (descendants of Mughals)” over the Hindus.

In fact, Shah harped on the “attack on Sanatan dharma, infiltration (of Muslims from Bangladesh) and cancellation of holidays for Rakshabandhan and Janmashtami festivals” while addressing a public meeting at Jhanjharpur in Bihar’s Darbhanga district on September 16 too.

Alternative Approach

Contrary to the BJP playing the aggressive Hindutva card, Nitish Kumar and Tejashwi Yadav represent the combination of experience and youthful energy. The two leaders are focussed on the real issues concerning people.

While the BJP has apparently dwelled on emotive issues, Nitish and Tejashwi are reaching out to the people with employment opportunities, a key demand. They are trying to win over the youths in the run up to the 2024 elections. Tejashwi, during his campaign for the 2020 Assembly election, had promised 10 lakh jobs would be created for the unemployed youth of the state. Nitish had said his government would ensure 20 lakh jobs to the educated unemployed after Tejashwi joined him in August 2022.

The Nitish government has created about four lakh job opportunities after the formation of the Mahagathbandhan government. The Nitish-Tejashwi duo has organised several events to allot employment letters over the last year. The event scheduled on November 2 is billed as the biggest outreach programme to the young, who constitute a large proportion of the state’s population.