Manufacturing sector records phenomenal growth under Modi government

Manufacturing activities in India have been growing at a good pace since the last four months. The Purchasing Manager Index (PMI) of Nikkei India touched 11 months high to 54 in November from 53.1 in October. Any number above 50 indicates the expansion in manufacturing activity while a score below this indicates contraction. In the last 11 months, the score has been above 50 which means manufacturing is moving on a positive track under Modi government with initiatives like ‘Make in India’ paving way the betterment of this sector. The new orders for products in November this year witnessed a huge surge. The growth in exports has also witnessed an upward trend in November, “Growth of new export work quickened to the fastest in just under four years, as producers reportedly received bulk orders from clients in key export destinations,” read the survey report by INS Markit.

With the decline of petroleum prices and an increase in the value of Rupee, the input cost of manufacturing has gone down. The consumers have already spent a lot of money in the festive season and this has resulted in increased sales enabling the manufacturers to increase the price. The decreased input cost and increased sales have helped the companies with rise in operating margins. “Signs of rising confidence in the upturn were also provided by the trend for employment, which continued to grow at one of the quickest rates seen in six years. Supply-chain pressures remained weak, which, however, supported a softer rise in input prices,” noted Pollyanna De Lima, a principal economist at IHS Markit.

This is the 16^th consecutive month when manufacturing PMI has remained above 50 point mark, indicating expansion. Pollyanna De Lima was of the view that with positive records in the last few months, the country will enter in 2019 with a  positive note as far as the economy is concerned. “Manufacturers further drew down their finished goods stocks to meet demand. This, coupled with an improved business sentiment, should ensure that production continues to rise at a robust clip as we head towards 2019,” said De Lima.

The reason behind improved manufacturing activity is a consistent effort from the government. Modi government has worked relentlessly to ease out business processes in the country. When Modi government came to power, India ranked 142 out of 189 economies in the World Bank’s Ease of Doing Business Report. Prime Minister shared a vision to bring the country amongst top 50 nations in the ranking and worked consistently in the last four years to achieve the goal. The reforms of the last four years resulted in a jump of 65 positions to 77^th from 142^nd. Other structural reforms like GST implementation to homogenize the domestic market, Insolvency and Bankruptcy Code (IBC) to solve the NPA problem and enhance credit flow also helped in the improvement of the manufacturing sector. Given the rise in the manufacturing sector, the problem of unemployment is also set to be solved. Employment for unskilled and semi-skilled workers has been a problem for the country for decades. Previous governments just made populist promises but never tried to solve structural deficiencies in the economy. Modi government in its very first year brought ‘Make in India’ scheme to make the country a manufacturing hub and finally, the policies have started paying off.