Big-bang reforms now need to give way to grunt work
Economic Surveys, being documents authored by advisors appointed by the Centre, often struggle to find the right balance between celebrating the achievements of the government and flagging areas where more work needs to be done. The Economic Survey for 2023-24 manages this tightrope walk quite well.
While noting that India’s real GDP in FY24 is 20 per cent higher than pre-pandemic levels, the Survey projects growth for FY25 at 6.5 to 7 per cent, lower than estimates from Reserve Bank of India (7.2 per cent) and most private forecasters (7 per cent plus). The Survey stands some popular narratives on their head. It says a private capex surge is already underway citing 19.8 per cent growth in fixed investments by private corporations in FY23. It dismisses the notion that households are in distress, pointing to their savings flooding into housing and capital markets. It glosses over sluggish private consumption, terming it as steady. In a later chapter, it subtly points out that India Inc has not expanded its worker compensation at the same pace as its manifold growth in profits since Covid.
Rising trade protectionism and de-globalisation, geopolitical tensions, climate transition and Artificial Intelligence are all challenges that India will need to contend with. It advises, sanely, that policy choices for India need to be driven more by pragmatism than ideology and warns that a blind aping of the West will not serve. On energy transition, it makes the sensible point that chasing the Western idea of net-zero may be unwise, as it raises resource dependence on hostile nations (read China), ties up land in unproductive uses and saddles the fisc with subsidies. It offers workable ideas to overcome these challenges too. Agriculture and allied sectors can be a potent engine for growth and employment, if only we can consolidate fragmented land holdings, improve market intelligence and have a vibrant derivatives market. It shows that repealing draconian laws on land use can double the space available to Indian factories, boosting manufacturing and employment. That bridging the skill gap is key to boosting industry is well-known, but the idea of deregulating State-level laws that bar women workers from several industries, is novel. Perhaps with an eye on the election outcome, a chapter is devoted to inflation. After patting the Centre for administrative measures and fuel price cuts that have lowered non-core inflation, the Surveycalls for a relook at the inflation-targeting framework.
A recurring theme is that the big-bang reforms that were propelling India’s growth story are now done, and that it is now time for grunt work on the individual factors of production. There’s also sub-text that the Centre cannot achieve this alone, but will need participation from States, local governments and the private sector. However, excellent ideas from Economic Surveys seldom make it to implementation. One hopes that this ideas-rich Survey turns out to be an exception.
