Slight enthusiasm on jobs front in overall PMI

A reading above 50 indicates expansion. It should be noted that the Composite Production Index is the weighted average of the Manufacturing Production Index and the Service Business Activity Index.

With uncertainty over the new forms of the coronavirus and the inability of companies to pass the burden of increased cost inflation, economic activity in both sectors failed to make a lasting recovery. The sluggish business environment had a direct impact on employment.

The December data showed renewed job losses in the services sector, though the rate of contraction was modest, the PMI survey report said.

In addition, about 96% of companies left payroll numbers unchanged in December compared to November.

“Firms generally suggested that employment levels were sufficient to cope with the current workload,” the PMI report said. On an aggregate level, the December data pointed to a broader decline in employment, with the employment sub-index declining for the first time. In fact, data provided by IHS Markit showed that the index slipped below the crucial 50-mark and was in contraction territory in December.

According to Rahul Bajoria, Chief Economist of India at Barclays, “Compared to the last 12 months, business activity has improved in both manufacturing and services sectors; however, as far as employment is concerned, we are not at pre-Covid levels.” The total stock of employed people is still sub-par. If we look at the trends in rural and urban job markets using CMIE data, it also indicates tension in the labor market. Hence, employment relations There is a lot of lethargy and the outlook largely depends on how the situation is with the new Kovid variants.”

“While we believe that fears of a complete lockdown are lagging behind, a lack of clarity on the seriousness of the new variants has put companies on edge on their employment and investment decisions,” Bajoria said.

Some economists also point out that the PMI survey captures data from companies that are largely in the formal sector and that job losses can be enormous in India’s informal economy, which is large and fragmented. Simply put, headline numbers may show improvement, but employment is likely to remain a pain point, at least in the short term.