Opinion Express View on Economic Survey: Business, not as usual

With rather uncharacteristic frankness, the Economic Survey 2024-25 talks about the “trust deficit” among economic agents in the country, overcoming which could help pave the path for a Viksit Bharat. Trust is indeed a two-way street. And it is perhaps because of this trust deficit that the private investment cycle has not taken off, despite the “tailwind” of strong firm and bank balance sheets. The survey says, and rightly so, that “wiping out the trust deficit in the country is imperative and government agencies have to set the agenda in this regard”. But, only a narrow interpretation of this statement would view government agencies as limited solely to the IT department, CBI and ED — it includes the entire state apparatus. Building trust may well be the key, but the question is whether this spirit finds reflection in the budget and the government’s working.

The Narendra Modi government has articulated the goal of Viksit Bharat@2047. Achieving this would require growing at around 8 per cent for a decade or more as per the Survey. This appears to be a daunting task. To put this growth trajectory in perspective — the economy is expected to grow at 6.4 per cent this year, between 6.3 and 6.8 per cent in 2025-26 as per the Survey, and average around 6.5 per cent between 2025 and 2029 as per the IMF. But what will be the drivers of growth? With globalisation “on the retreat”, the Survey says that the “domestic growth levers will be relatively more important than external ones in the coming years”. This export pessimism, at a time when China has registered a trade surplus of almost $1 trillion, is rather odd, especially considering India’s share in global trade. It reflects the Modi government’s approach to trade, which has been marked more by fear than hope.

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Notwithstanding that, the Survey argues that sustaining high growth over the next two decades will require a “deregulation stimulus”, not a fiscal or monetary stimulus. It has mounted a strong argument for “rolling back regulation significantly”. Or to put it bluntly, “getting out of the way”. There can be no quarrels with this. Excessive regulations, after all, increase costs for business. But, the onus for deregulation, in large measure, seems to have been laid at the door of state governments. It is also odd for the Survey to speak about simplification when there has been little progress on reducing the complexity of the GST regime. Moreover, “getting out of the way” should not be limited to just easing the regulatory cholesterol. The government must get out of business. But despite articulating that, there has been little movement on privatisation. The survey is indeed correct when it says that “business as usual carries a high risk of economic growth stagnation, if not economic stagnation”. At the current juncture, bold steps are required.