Those green shoots need nourishing

Those green shoots need nourishing

Data suggests a welcome pick-up in growth in the festive season, aided by manufacturing activity that climbed the most in more than a decade in October. The government must consolidate the momentum with a hefty dose of fiscal stimulus, as advocated by IMF chief economist Gita Gopinath. She has underscored the need for a fiscal stimulus — large-scale investment in medical facilities, digital infrastructure and environment protection — to boost recovery as the global economy is in a liquidity trap where monetary policy has a limited effect. Given that RBI has done most of the heavy lifting so far, the government must spend, without worrying about a nearterm spike in the fiscal deficit.

The IHS Markit Purchasing Managers’ Index for manufacturing rose to 58.9 in October, the highest reading since May 2010. Domestic orders led the recovery, even as export orders accelerated. The orderto-inventory ratio stood robust at 1.6 in September (against 1.2 long-term average). The resumption of economic activity led to higher GST revenues, that grew by 10% to touch Rs 1.05 lakh crore in October, as also improvement in the core sector output and e-way bills. But what is worrisome is the absence of corresponding bounce in the jobs data: payroll numbers declined for the seventh consecutive month. Jobs cannot be created unless there is sustained economic activity, underscoring the need for a large fiscal stimulus.

The good news is that white collar hiring is up sharply, both in established companies and startups, according to company data and a survey. If high-end white-collar jobs proliferate, it would drive up consumption demand. When these professionals start spending, say, on buying homes, it would spur activity that would create low-skilled jobs at scale, including in construction. Redeploying skilled jobs to India from the rest of the world is a huge opportunity that can be tapped only if economic recovery is sustained. To sustain recovery, the government must catalyse largescale investment, in social and physical infrastructure.