Economic Survey 2025 is worth preserving for this one piece of advice

The overarching theme of the Economic Survey 2024-25 is ‘deregulation’ and the benefits thereof. (ANI Photo)
The overarching theme of the Economic Survey 2024-25 is ‘deregulation’ and the benefits thereof. (ANI Photo)

Summary

  • The Survey sees “Getting out of the way” and allowing businesses to focus on their core mission as a significant contribution that governments around the country can make

In an article for the Mint, chief economic advisor V. Anantha Nageswaran expressed the hope that the latest Economic Survey’s proposed answers to the many challenges facing the economy—the course of key interest rates, energy transition, the drivers of global growth, impact of artificial intelligence on job markets, etc —“will influence, illuminate and delineate [the government’s] approaches to the more enduring challenges."

The CEA’s fervent wish is reminiscent of what Samuel Johnson once said of second marriages. They represent ‘the triumph of hope over experience.’ The reason is simple. The Survey is authored by technocrats under the leadership of the CEA, who, unfettered by the compulsions of realpolitik, are free to make suggestions that most democratically elected governments would baulk at. Technocrats, after all, do not have to get re-elected; politicians do! The former can, therefore, condemn freebies and other handouts that impact the health of the fisc; the political class has to tread more warily.

This is not to say that Economic Surveys serve no purpose at all. On the contrary, apart from being the most authentic record of economic events that marked the fiscal year drawing to a close, Surveys are an invaluable testing ground for new ideas. Ideas that might seem radical when they are first made, but over a period of time, allow governments to act on them. And in the interregnum, offer us the much-needed space and time for public debate, without which no course correction is possible in a democracy.

Economic Survey 2024-25 (CEA Nageswaran’s third) is no exception. It is, as he put it in the Mint article quoted above, “a comprehensive compilation of information and perspectives on the state of the Indian economy. It delves into issues that warrant focused and continued attention, providing insight and analysis crucial to understanding India’s economic landscape" during a period when the “pace of change has been dizzying, whether in politics, economics, markets or technology."

Apart from being the most authentic record of economic events that marked the fiscal year drawing to a close, Surveys are an invaluable testing ground for new ideas.

The overarching theme of the Economic Survey 2024-25 is ‘deregulation’ and the benefits thereof. In a preface titled, ‘Driving domestic growth and resilience through deregulation,’ the Survey says “lowering the cost of business through deregulation will make a significant contribution to accelerating economic growth and employment amidst unprecedented global challenges."

In this, the Survey seems to have taken a cue from former US President Ronald Reagan’s news conference in August 1986 when the actor-turned-US President famously declared, “The nine most terrifying words in the English language are: ‘I’m from the government, and I’m here to help.’" 

So the Survey sees “Getting out of the way" and allowing businesses to “focus on their core mission as a significant contribution that governments around the country can make to foster innovation and enhance competitiveness."

The most effective policies governments both the Union and states can embrace, it says, 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. That means changing the operating principle of regulations from ‘guilty until proven innocent’ to ‘innocent until proven guilty’."

Most businesses will agree with this assessment. The red tape and bureaucratese that dog businesses in India are legion. The common man, however, might have a slightly different take on this. Given the K-shaped recovery post-covid, the aam janata might argue that there is a case for greater government interference to ensure that faster growth goes hand-in-hand with greater equity. And the ‘invisible hand’ of the market backed by the very visible hand of the government.

Also Read: Inequality alert: India’s economy appears to be getting even more K-shaped

Some salient points from the Economic Survey 2024-25

On growth: The Survey projects growth in the 6.3-6.8% range in the next fiscal year, a number that it argues is “consistent with the philosophy that the government and the

Ministry of finance have adopted in the last five years with respect to fiscal goals: be realistic and strive harder to do better than that." Sure, the outcome of Trumponomics makes almost any number look like a guesstimate. Nonetheless, the Survey’s growth estimate looks reasonable.

Also Read: Adapt to a Trumpian world order in a way that makes India great

On the role of the private sector: The Survey calls on the private sector to partner the government in development. “The efforts of the Union Government would need to be supplemented with wholehearted acceptance of the need for public-private partnerships in infrastructure across the country. Equally important, the private sector must reciprocate, too," says the Survey.

On financialization of the economy: The Survey cautions against the “risk of financialisation and asset price bubbles that are now endemic to the West" and defends the measures taken by India’s regulators “to rein in excessive and financially ruinous speculation for investors" as necessary, not just for systemic stability, but also from the perspective of welfare.

On a pragmatic engagement with China: The idea first mooted in last year’s survey makes an appearance in the latest one as well with ‘China’ appearing as many as 100 times in the 482 page document.

On the external sector: The Survey raises the question of whether India’s sustainable current account deficit is lower than previously estimated, given challenges on the global trade front and rising protectionism. This is something that the government and Reserve Bank of India need to ponder, given the reality of a strengthening dollar and our continued dependence on oil imports.

On climate change: The Survey calls for a “calibrated and careful" approach to climate change and energy transition, while cautioning against the dangers of over-reliance on a few suppliers/countries for key components. It points out, “The import intensity of E-Vehicle production—especially from countries with whom India has persistent and large trade deficits—is very high."

On artificial intelligence: AI gets a look-in with the Survey suggesting “with all humility" that “some of the fears might be misplaced." This is good news, but it remains to be seen if the Survey’s confidence on this is borne out by future events.

Also Read: What Economic Survey 2024-25 says on 7 challenges facing the government

Overall, the Survey must be commended for laying out the challenges and opportunities facing the economy at this critical juncture. The problem is that like some of the questions it poses (which in Nageswaran’s words “have a shorter shelf-life"), Economic Surveys, as a genre, have a short shelf-life.

One hopes this is not true of the Economic Survey 2024-25, as it contains some excellent suggestions that the current and future governments would do well to bear in mind.

The author is a former central banker.

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
more

topics

MINT SPECIALS