Economic Survey expects all hands on the deck approach to steer the India to a Viksit Bharat by 2047. The CEA has sounded a cautionary note on the growth expectations for FY25 as well as the medium term. It highlights the fact that the global scenario in which China attained its growth was very different than what India faces now. There is increased global protectionism, sustainability concerns and distortion of the labour markets with emergence of artificial intelligence.
The Survey flags that though the private sector capex has started picking up but the investments in intellectual property, machinery and equipment is significantly lagging. This will have an impact on good quality manufacturing jobs in the future. Similarly, industry has been exhorted to contribute to skilling and curriculum development to make the youth more employable. The academia also has a huge role to play.
The Survey has also highlighted that the policy choices for India need not be binary and we need to have a multitude of buttons to be pressed to address the challenges of such a diverse and large country. Overly focusing on manufacturing and the transition of jobs from farm to industry and services that is a traditional path of evolution may no longer be available or applicable in case of India. An emphasis has been made on rethinking this paradigm and the need to focus on how agriculture sector itself can provide more value enhancing jobs.
The Survey quotes the IMF paper on possible higher taxation of corporates for redistribution of wealth given the disruptions coming from generative artificial intelligence. However, it cautions against the same and highlights that jobs are not necessarily only for subsistence but for personal dignity and exhorts the private sector to invest more to create jobs given the unprecedented profits made post pandemic and the tax cuts provided by the government.
The Survey presents the growing confidence on the external front with our rising foreign exchange reserves. It has highlighted how overseas capital invested in India has been able to book and repatriate profits. This is stated to be good in the long term as it will attract more capital investments in the country in future. The Survey however has also cautioned against the risks from increasing market capitalization to GDP ratio and derivatives to the stability of capital markets given the expanding base of retail investors. The Survey also highlights the risks from mis-selling of financial products including insurance that may lead to challenges in further improving the penetration rate of insurance and finance in the country.
The services exports have delivered strong results. However, the Survey presents a caution that this engine may not be able to continue to fire over the next decade owing to headwinds from the developments in telecommunication standards, artificial intelligence, and protectionism. The Survey highlights the imperative to support the MSMEs. It highlights the disproportionate costs and impediments the MSMEs bear from regulations and the need for enhancing their ease of doing business.
The Survey acknowledges that the monetary policy interventions through increase in policy rates have led to proce stabilization with core inflation clearly under check. However, the food inflation is a worry and is dependent on weather vagaries. Better price monitoring and price stabilization measures will be needed going forward to contain food inflation.
The Economic Survey 2023-24 presents itself as an honest assessment of the economy presenting the significant achievements made in terms of trade, monetary policy, fiscal policy, growth, financial inclusion amongst others. It also presents some of the challenges that face the economy in terms of jobs, agriculture sector stress, food inflation, skilling imperative and private capex not picking up owing to confidence in consumption growth still not being in place. It makes a realistic assumption of the growth being in the range of 6.5% to 7% given the various headwinds and challenges facing the global and Indian economy. It has therefore rightly highlighted the need for a compact between central government, state governments, industry and academia to steer India to a Viksit Bharat. It also quotes the Ishopanishad highlighting the need for the government to let go on the need to over-regulate that causes more burden on the MSMEs.
We now await the Union Budget announcements on measures to address some of these headwinds and challenges facing us!
The writer is Partner and Leader Economic Advisory, PwC India
