Economic Survey pegs growth at 6.3% to 6.8%

The Economic Survey is prepared by the Economic Division of the Department of Economic Affairs in the Ministry of Finance under the supervision of Chief Economic Advisor V. Anantha Nageswaran.
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The Hindu

India’s economy is expected to grow in the range of 6.3% and 6.8% in 2025-26, the Economic Survey for 2024-25, tabled in Parliament on Friday (January 31, 2025) reckoned, arguing that the fundamentals of the domestic economy remain robust, with a strong external account, calibrated fiscal consolidation and stable private consumption.

While there are upsides to domestic investment, output growth and disinflation in the coming year, these are peppered with equally strong, prominently extraneous, downsides, the Survey’s authors stated, referring to significant global political and economic uncertainties as a key risk.

Globalisation is in retreat

“Navigating global headwinds will require strategic and prudent policy management and reinforcing the domestic fundamentals,” the Survey asserted, with Chief Economic Adviser V. Anantha Nageswaran emphasising that globalisation is in retreat and the era of rapid world trade growth clouds the outlook for India’s export growth so domestic growth drivers will be more critical in coming years.

“… Historically, India’s export growth has been a high beta play on global export growth. This means domestic growth levers will be relatively more important than external ones in the coming years,” he averred in his preface to the Survey.

Reaping the demographic dividend

Raising India’s growth average in the next two decades will require reaping the demographic dividend through a deregulation stimulus, Mr. Nageswaran said, pointing to the Spartans’ apparent belief “the more you sweat in peace, the less you bleed in war”.

“This Economic Survey is all about that, or so we would like to believe,” he said in the preface, cautioning that ‘Business as usual’ carries a high risk of economic growth stagnation, if not economic stagnation for the country.

Survey’s warns against dependence on Chinese supply

Referring to the impact of China’s emergence as a manufacturing colossus on global firms’ competitiveness, the CEA said this is ‘no less’ a challenge for India too.

“India faces limitations in producing critical goods at the scale and quality required to serve the infrastructure and investment needs of an aspiring economy,” he noted. Citing India’s low production capacity in the solar energy sector for key components like polysilicon, ingots, and wafers, the CEA said though the output of monocrystalline silicon ingot is expected to quintuple by 2025 from 2 GW in 2023, it won’t be enough to meet domestic demand.

“Several solar equipment manufacturers in the country significantly depend on Chinese supply chains and related services. The single-source concentration risk in several product areas exposes India to potential supply chain disruptions, price fluctuations and currency risks,” he added.

Needed now: a competitive and innovative economy

“India’s task is cut out. It means going all out to attract, promote and facilitate further domestic and foreign investments that India needs to become a competitive and innovative economy. It will not be easy because competition for investment is not only with other emerging economies but advanced economies, too, who are determined to keep their businesses at home,” Mr. Nageswaran pointed out.

Allow businesses to focus on their core mission

As a broad prescription to fuel domestic growth levers, the Chief Economic Adviser said policy efforts will have to be underpinned by the philosophical approach to governance of “Getting out of the way” and allowing businesses to focus on their core mission.

“The most effective policies governments – Union and States – in the country can embrace is to give entrepreneurs and households back their time and mental bandwidth. That means rolling back regulation significantly. That means vowing and acting to stop micromanaging economic activity and embracing risk-based regulations,” he argued, adding that the operating principle of regulations must move from ‘guilty until proven innocent’ to ‘innocent until proven guilty’.

“Adding layers of operational conditions to policies to prevent abuse makes them incomprehensible and regulations needlessly complicated, taking them further from their original purposes and intents,” the CEA cautioned, while conceding that “getting out of the way” is not easy for societies still structured around communities, groups, and kinship, that are largely hierarchical in nature.

“..In close-knit and kinship-based communities such as India, the trust quotient is still high within but low without. That inhibits scale. The low-trust quotient also gives rise to elaborate verification, compliance and reporting requirements,” Mr. Nageswaran noted.

Trust deficit

“But, ‘get out of the way’ and trust people, we must, for we have no other choice. ‘Business as usual’ carries a high risk of economic growth stagnation, if not economic stagnation. Yes, trust is a two-way street and the non-government actors in the economy have to vindicate the trust reposed,” he stressed, while laying the blame for a “significant chunk of the complicated compliance requirements” on efforts of businesses wanting to keep out domestic and foreign competition to the detriment of other industries and the economy.

“Nonetheless, wiping out the trust deficit in the country is imperative and government agencies have to set the agenda in this regard. Then, it is a good bet that the Indian public will overcome the challenges and turn them into opportunities on the way to Viksit Bharat by 2047,” the CEA’s preface to the Survey concluded.