India's Manufacturing Activity

In December, India's manufacturing activity experienced its slowest growth rate in 12 months due to increased competition and price pressures, as highlighted by an HSBC Purchasing Managers’ Index (PMI) survey conducted by S&P Global.

Key Highlights

• The PMI eased to 56.4 in December from 56.5 in November, indicating a slight dip in manufacturing activity.
• Despite the December slowdown, the average PMI for 2024 improved to 57.5 compared to 56.8 in 2023, suggesting a stronger annual performance.
• The rate of expansion in new orders hit its lowest for the year, hinting at potential weaker growth in future production.
• A PMI reading above 50 signifies expansion in the sector.

Factors Influencing Growth

• Advertising and positive client appetite played a crucial role in supporting sales.
• Favorable demand was the primary driver for production growth.

Challenges Faced

• Price pressures intensified, with a significant rise in container, material, and labor costs since November.
• The increase in selling prices was one of the highest in approximately 20 years.

Employment and Output Outlook

• Manufacturing employment grew for the tenth consecutive month, with hiring reaching a four-month high in December.
• Approximately 10% of companies increased their workforce, while less than 2% reduced jobs.
• The outlook for 2025 remains positive, with manufacturers expecting a rise in output despite ongoing concerns about inflation and competitive pressures.

Government Allocation for Centrally Sponsored Schemes

The government plans to maintain the allocation for Centrally Sponsored Schemes (CSS) at approximately ₹5.05 lakh crore for the fiscal year 2025-26. This decision comes amid efforts to monitor funds closely and consolidate various schemes.

Key Points

• The allocation for CSS had seen a 9.8% increase in FY24.
• Efficient fund utilization through technology and enhanced efficiency measures has been prioritized.
• The government anticipates saving around ₹30,000 crore in the current fiscal year due to stricter expenditure tracking and slow spending by states.
• As of December 1, 2024, about ₹40,000 crore remained unspent in government balances.

Single Nodal Agency (SNA) System

The transition to a Single Nodal Agency (SNA) system has facilitated better monitoring of fund usage. The central government intends to include all states on the portal by the next fiscal year, with eight states joining in 2024, bringing the total to 18.

Flagship CSS Programmes

• Ayushman Bharat – Pradhan Mantri Jan Arogya Yojana (PMJAY)
• Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)
• Pradhan Mantri Awas Yojna-Urban and PMAY-Gramin
• Jal Jeevan Mission (JJM)
• Pradhan Mantri Gram Sadak Yojna (PMGSY)

Rationalisation of CSS

The government is working towards further rationalization of CSS. In March 2015, a sub-group of chief ministers was formed by Prime Minister to address this issue, resulting in a reduction of the number of schemes from 130 to 75.

PM E-Drive Scheme and Its Impact on Electric Truck Adoption

The PM E-Drive scheme, launched to boost electric vehicle adoption in India, particularly targets the electrification of trucks. However, industry executives highlight several challenges and limitations within the scheme.

Key Challenges

• Scrapping Requirement:
  • The scheme mandates purchasing an electric truck only with a certificate of deposit from scrapping an old truck, which may deter potential buyers.
  • The financial disparity between the value of a scrapped diesel truck and a new electric one is significant, making this transition economically unfeasible for many.
• Alternative Certificate Acquisition:
  • Consumers who never owned a truck can procure a scrapping certificate from others to benefit from the incentives, which might complicate the process.
• Charging Infrastructure:
  • The limited charging network restricts the effective operational range of electric trucks to 150-200 kilometers.

Incentive Details and Industry Perspective

• Incentive Allocation:
  • Under the ₹10,900 crore scheme, ₹500 crore is allocated specifically for electric trucks over 3.5 tonnes gross vehicle weight. This is the first instance of such inclusion.
• Industry Insights:
  •  Scheme might act as a catalyst for EV adoption, particularly in medium and short-range geo-fenced applications with suitable support.

Environmental and Economic Considerations

• Environmental Benefits:
  • Electric trucks using grid-average electricity emit 17-29% fewer greenhouse gases than diesel trucks, and 78-83% fewer with renewable energy.
• Cost and Efficiency:
  • Electric trucks are approximately 65% more efficient, reducing fuel usage and operational costs.

Barriers to Adoption

• Cost Disparity:
  • The price of a 16-tonne electric truck is 4-6 times higher than its diesel counterpart, placing it out of reach for many potential buyers.
• Battery and Range Limitations:
  • Long-haul battery electric trucks are not competitive due to high costs, increased weight, and longer charging times.

Future Technological Advancements

• Hydrogen and Fuel Cell Technologies:
  • These technologies are expected to mature and be more feasible in the mid to long term, necessitating support through incentives and infrastructure development like hydrogen refueling stations.

Ministry of Skill Development and Entrepreneurship (MSDE) Initiatives

The MSDE is collaborating with five central ministries to assess their specific demand for a skilled workforce, aligning training initiatives with sector-specific and demand-specific needs under the Skill India mission.

Objective and Strategy

• Provide short-term training, reskilling, and upskilling to create a skilled workforce.
• Conduct skill gap analysis across various schemes to project the demand over the next five years.
• Plan to initiate training by the financial year 2025-26.

Benefits

This initiative aims to fast-track skill training in the country, ensuring schemes are implemented by professionally trained personnel, thereby improving effectiveness and achieving desired outcomes.

Training Programs

• Short-term training: 200-600 hours.
• Recognition of Prior Learning (RPL) based up-skilling: 30-132 hours, under the Pradhan Mantri Kaushal Vikas Yojana (PMKVY 4.0).

Involved Ministries

• Ministry of Tourism
• Ministry of Health and Family Welfare
• Ministry of Housing and Urban Affairs
• Ministry of Consumer Affairs, Food and Public Distribution
• Ministry of Social Justice and Empowerment

Specific Schemes Requiring Skilled Manpower

• SWAGATAM under the tourism ministry.
• Municipal solid waste management under the housing and urban affairs ministry.
• Food safety and standards authority of India.
• Managing PM Kisan Samridhi Kendra.
• NAMASTE scheme (National Action for Mechanised Sanitation Ecosystem) for promoting safe sanitation practices.
  • The NAMASTE initiative aims to formalize workers engaged in hazardous cleaning and promote mechanized and safe cleaning methods.

Rural Employment Demand in India

Increase in Work Demand under MGNREGS

• Work demand under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) rose for the second month in December.
• About 25.8 million people sought work, an increase of 7.4% from the previous year.
• This included 21.58 million households, showing an 8.3% rise.
• The rise was attributed to an unfavourable base effect and the return of farm laborers post-Kharif harvest.

Factors Affecting Work Demand

• Work demand had decreased from November 2023 to October 2024 due to improved job prospects.
• High monsoon rains in the previous year encouraged a shift to farming.
• After harvesting summer crops, laborers returned to seek work in December.

Economic Indicators and Future Outlook

• Rural consumption demand remained resilient, as indicated by increased sales of two-wheelers, three-wheelers, and tractors.
• The finance ministry forecasted economic growth to reach 6.5% in FY25, up from 6% in the fiscal first half.

Summary of Fiscal Quarter Data

• In fiscal first three quarters, 229.8 million individuals from 183 million households demanded NREGS work.
• Work demand increased by 19.7% for individuals and 17.5% for households in December compared to November.