Deregulation, or the process of dropping regulations in certain sectors, will be a big theme for the upcoming Economic Survey of 2024-25, which will be presented in February along with the FY26 budget, Chief Economic Adviser V Ananth Nageswaran said on Thursday. . The CEA also underlined that the growth projection of 6.5-7 per cent for FY25 still looks “possible”, stressing that improvements in the pay structure of employees by corporates are needed to drive consumption and savings growth.
Stating that the labor force has been ‘informalized’ after the Covid-19 epidemic, Nageswaran said that more contract workers than regular ones are hired and the salary increase of such corporate employees has not kept up with the rate of inflation. , and this has increased “downward pressure” on consumption. “…if you want to make consumption a driver of growth, it’s clear that some change in the hiring practices of the corporate sector has to be seen as a possible source. Post-Covid there has been what I call the informalization of the workforce in the Indian corporate sector. It’s an optimal solution for each company individually. Or it could be a logical solution. But collectively it puts downward pressure on consumption,” he said at an event organized by industry chamber Assocham.
Quoting data on wage growth from Qase Corp and FICCI reports, the CEA said “annual average wage growth for contract employees across sectors has not kept pace with inflation”. He said that companies’ profits in absolute terms have increased 4 times in the last four years and reached a 15-year high as a share of Gross Domestic Product (GDP). He said that if there is to be a secular increase in consumption, work should be done to transform small and medium industries into medium and large enterprises. Capital costs should be low; and employment to ensure income growth and thereby increase spending. “Otherwise, it will be a mutually self-destructive cycle,” he said.
In the upcoming economic survey, “capable and vibrant” small and medium enterprise sector, human capital infrastructure and deregulation will be explored, he said. He says that the private sector should find the ‘right balance’ between capital-intensive and labor-intensive growth.
Nageswaran said the policy could do more in terms of deregulation to reduce both the gender divide and job creation. “For example, the number of occupations banned for women in different states, if you add them up, it comes to 118 restrictions. These occupations are considered risky for women when women are being fighter pilots and they are participating in defensive, commercial airline flights.
“So if you want to say women’s labor force participation or employment in general, the focus should be on the plumbing of deregulation in state and local government. We touched on that a little bit in the Economic Survey in July and that will be a big theme. Deregulation or divestment is also a big theme for the next Economic Survey. Yes,” said Nageswaran.
Emphasizing the role that MSMEs (Micro, Small and Medium Enterprises) have to play in increasing the share of manufacturing in the country’s GDP to 25 percent or more, Nageswaran said India should learn from the success of Germany and Switzerland in this regard. . He said some Indian enterprises choose to ‘micro’ stay to enjoy the concessions that come with staying below certain thresholds. “If we are to grow, we must break the tyranny of concessions,” he said.
On the overall economic growth front, Nageswaran said economic activity picked up in some sectors in the first two months of the October-December third quarter, with GDP growth of 6.5-7 percent as projected in the Economic Survey 2023. 24, is possible for the current financial year.
His comments came after the latest GDP print released on November 29 showed India’s July-September growth fell to a seven-quarter low of 5.4 percent. The CEA said the 5.4 percent second-quarter GDP growth estimate could be revised upward, as current estimates are not seasonally adjusted.
“I think reacting to these numbers, I don’t think we should throw the baby out with the bathwater. Because the underlying growth story is still very much intact,” Nageswaran said.
He said the slowdown in GDP growth in the second quarter could be due to some “religious observances” and excessive monsoon rains in September, and many other long-standing issues were beginning to surface. So the explanations could be more serious than mundane, he said, adding that this is the first estimate for second-quarter GDP growth. “It can be highly modified,” Nageswaran said.
He noted that the Indian economy needs to clock 7 percent real GDP growth in the next two quarters to be able to achieve growth of 6.5 percent for the year as a whole. “I think if you look at some of these pickups, it’s possible that’s happened in certain areas. So I believe that growth in the range of 6.5-7 percent is possible for the year,” he said.