​A pragmatic picture: On the Economic Survey 2024-25

Parliament’s Budget session has begun amid a significantly changed backdrop. India’s growth is seen faltering after four years of healthy post-pandemic growth, the stock markets are tumbling, the rupee is losing ground faster than expected, and the major drivers that have been spurring the economy — domestic demand and public sector capex — are sputtering, while private investments remain insipid. For context, the five years from 2019-20 to 2023-24 have seen government capex increase at a compounded annual growth rate of 16%, household investments by 12%, while corporate outlays were up only 6%, despite a steep tax rate cut for them. A slowdown in the well-moving economic levers is, thus, a cause for concern. That the new U.S. administration seems determined to upend global trade and taxation arrangements, is also unsettling. The Economic Survey 2024-25, has warned that, with globalisation in retreat, India must focus on domestic factors to spur growth higher while becoming more competitive vis-à-vis rival markets looking to attract foreign investors.

The Survey’s prognosis that real GDP growth may be in the range of 6.3% to 6.8% in 2025-26, from the 6.4% pace estimated for this year, acknowledges that economic momentum may slip further in the face of new headwinds. That the Survey’s authors have posited that anything short of a growth pace of around 8% over at least a decade would make it tough to realise India’s aspiration to be a developed nation by 2047, is significant, along with their warning that a ‘business as usual’ approach risks fomenting economic stagnation. While lauding recent reforms, the Survey has cautioned they will not deliver their desired goals without deregulation. The Survey has some refreshing plainspeak in this context, emphasising it is critical for the government to ‘get out of the way’ of businesses by undoing regulations that are tantamount to micro-management, and bridging the ‘trust deficit’ between authorities and citizens, as well as within the nation’s close-knit communities. Pushing for a refresh of the ease of doing business drive, it has made an impassioned plea to minimise controls that distort markets and adopt a ‘minimum necessary, maximum feasible’ approach to regulations, while seeking the same accountability from regulators that they stipulate for their constituents. The pitch to empower small firms, enhance economic freedom and ensure a level-playing field, holds weight too. For a government that has been recently infatuated by a spate of 1970s’-style bad ideas such as import curbs, production-linked incentives and questionable taxation misadventures, this is pertinent advice. Whether the government has bothered to listen, without prejudice, the Budget will tell.