The survey has admitted that global headwinds and changing landscape would force policymakers to derive most of the economic growth from domestic consumption alone
Chief economic adviser V. Anantha Nageswaran and his team at the Union finance ministry has perfectly diagnosed the malaise affecting the health of the Indian economy in their annual report the Economic Survey 2024-25. It is said that accurate diagnosis and admission of the problem is the first step towards finding its solution which the Economic Survey has unequivocally done. The survey has admitted that global headwinds and changing landscape would force policymakers to derive most of the economic growth from domestic consumption alone.
Though Prime Minister Narendra Modi has set an agenda to make India a developed country by 2047, the survey made it clear that the economy needs to grow at least by eight per cent annually compared to its growth forecast that stands at 6.8 per cent for the next fiscal, and investments need to grow at 35 per cent, up from the present 31 per cent. The survey is also truthful to the inflationary pressures that India could face on account of global uncertainties and the impact of new technologies on artificial intelligence and machine learning on labour-surplus countries like India. It lays focus on the importance of skilling its youth and reskilling the employed workforce.
The solutions that the Economic Survey offers are actually feasible and they would allow the country to tap the growth potential of its vast domestic market. However, in a globalised economy, the secret to success lies in competitiveness which, the survey says, could be improved only through grassroots-level structural reforms.
One of the major thrust areas for reforms, according to the survey, in India is systematic deregulation. While regulation is important for orderly growth, excessive regulation such as it exists in India encourages the practice of businesses paying speed money, which leads to an increase in production cost and reduces their competitiveness.
Another focus of the survey is reducing India’s dependence on fossil fuel, which has been the country’s nemesis for decades. As part of this agenda, the survey calls for tax breaks on EVs and subsidies on renewable energy for low-carbon lifestyles, while underscoring the issue of dependence on China for some critical components required to boost renewable energy production in the country.
The survey also discusses the need for Indian farmers to diversify their crops to pulses and oilseeds among others. It suggests institutional credit for landless farmers by promoting formal leasing agreements adopted in Kerala.
As the private sector has not recovered its animal spirits, the burden of providing stimulus for the economic growth would continue to remain on the government. Infrastructure will still require robust investment from both public and private sectors over the next two decades if India is to post high growth rates.
The survey also has a word of caution for equity investors. As the equity bubble grows in the United States and elsewhere, any major correction could impact Indian markets, which are teeming with greenhorn investors whose response to the bear market remains untested. In a nutshell, the survey foresees an economic minefield for finance minister Nirmala Sitharaman. All the best, madam finance minister!
