India needs to guard against technological disruption

The most recent Purchasing Manager’s Index (PMI) reflects a contraction in the manufacturing activity in India in December.  Most domestic and international analysts and experts are looking at it from the viewpoint of the move of the government which essentially removed 86 per cent of the currency as legal tender. The unprecedented move does seem to have had an adverse impact on the manufacturing and investment activity. Its benefits, at best, are uncertain at present though the government has been lauding the move from the viewpoint of recovering tax from income tax raids as well as the ability to levy tax on declared income beyond a threshold. Another positive the government has been vocal about is the change expected in behaviour of people to a less-cash economy. The All India Manufacturers’ Organisation has, meanwhile, issued a study which shows a 50 percent dip in revenues and 35 percent job losses for SMEs. The government must carefully look into these figures. Over the years, if one looks at the performance of the manufacturing sector, it has not been among the best performers. There are a number of reasons for this

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