Road map to Viksit Bharat
The 2024-25 Economic Survey emphasizes India's macroeconomic stability and calls for sustained 8% growth through domestic investment and reforms.
The Economic Survey, a voluminous document released a day before the Union Budget, is expected to play an important role. The budget responds to immediate political and economic considerations. These may or may not be in sync with structural economic challenges. It is on this front that the survey is expected to sound a note of wisdom and, if needed, caution.
The 2024-25 Economic Survey does justice to this larger role. Its key message is simple. India has done well to preserve its macroeconomic stability in a globally turbulent environment. This has ensured that the larger economic picture is not mired in crisis despite what looks like a cyclical slowdown. The survey has projected a growth rate of 6.3%-6.8% for the next fiscal year, not very different from the expected 6.4% number for 2024-25. However, the survey also reminds us, and rightly so, that India’s economic fundamentals, while relatively better in today’s world, leave no room for complacency, especially if the country needs to realise its goal of becoming a developed economy by 2047.
The survey is clear on what is needed: A sustained 8% growth rate for a decade or so. This, it says, must be powered by increasing investment spending, at least 35% of GDP. The idea itself is not new. It is on the question of how to get there that the survey engages in some hard talk. Growth drivers, it tells us, will have to be more domestic than foreign, driven by medium and small enterprises than larger corporates, will require a mutually beneficial contract between labour and capital, and necessitate reforms that will be more nuts and bolts at the sub-national level than a big bang at the national level. The survey is candid in admitting that a lot of the reforms so far have not been able to unleash the potential of medium and small enterprises in the economy. The most significant note of caution in the survey is the acknowledgement of the deteriorating global economic environment. The world at large is likely to generate headwinds for the Indian economy going forward, the survey rightly underlines. Advanced economies are turning more protectionist, China’s excess capacity in manufacturing will test even India’s import substitution efforts, let alone export promotion, and its existing prowess in areas such as services exports will be challenged by technological innovations such as Artificial Intelligence (AI).
What the world does not offer us, our domestic market and demographic dividend will have to compensate for, the survey says. For this to happen, policymaking will have to be nimble, pragmatic and result-oriented. It is difficult to find fault with the chain of reasoning in the survey. The question is what will it take for policy to do justice to this task? It is unfair to expect the budget to deliver on these things. It will probably try to find a balance between some amount of stimulus, if not tangible, at least psychological, and its fiscal consolidation imperative. Can governments, at the Centre and the states, work on the areas flagged by the survey, especially on building a dynamic ecosystem for MSMEs? Politically, this might not be very tempting, especially in an environment where cash transfers have become a necessary if not sufficient condition to win elections. However, this is too important an issue to be left unaddressed. Perhaps, the Niti Aayog, the survey’s ideological equivalent in the executive — its role is largely prescriptive and persuasive rather than making binding decisions — could step in.
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