Deregulation to be a big theme in upcoming Economic Survey: CEA

• Deregulation, or the process of letting go of regulations in some spheres, would be a big theme for the upcoming Economic Survey for 2024-25, which would be presented alongside the Budget for FY26 in February, Chief Economic Advisor V Anantha Nageswaran said.

Highlights:

• Chief Economic Advisor (CEA) V. Anantha Nageswaran outlined deregulation as a central theme for the upcoming Economic Survey 2024-25. His remarks emphasize critical aspects like workforce dynamics, MSME reforms, and the need for sustainable economic growth, setting the tone for discussions ahead of the Budget for FY26.

Key Themes in the Economic Survey

• Deregulation as a Growth Enabler:
  • The Survey will explore the "plumbing of deregulation" in state and local governance, targeting sectors that restrict participation and growth.
  • Notably, gender-specific occupational restrictions across states will be highlighted, with a push to eliminate barriers to increase female labor force participation.
  • Deregulation is also seen as vital for enhancing the ease of doing business for MSMEs and other industries.
• Workforce Informalisation and Wage Corrections
  • Post-pandemic hiring trends show a "creeping informalisation" in the corporate sector, where contractual employment has outpaced regular hiring.
  • Wage growth for contractual employees has lagged behind inflation, despite record profitability in the corporate sector. This mismatch is cited as a major factor exerting downward pressure on consumption.
  • A balanced approach to hiring practices and wage structure adjustments is deemed essential for sustaining consumption-led growth.
• Strengthening MSMEs for Manufacturing Growth:
  • MSMEs are critical for achieving the goal of increasing manufacturing’s share in GDP to 25%. Lessons from Germany and Switzerland will inform India’s approach to empowering small and medium enterprises.
  • CEA emphasized breaking the "tyranny of concessions," as many enterprises remain small to retain benefits, hindering their growth potential.
• Sustainable Growth Projections:
  • India’s economic growth for FY25 is forecasted at 6.5–7%, with real GDP needing to grow at 7% in the next two quarters to meet this target.
  • The slowdown in Q2 (5.4% growth) was attributed to transient factors like religious observances and excess monsoon rainfall, alongside emerging structural issues.
• Consumption and Investment Linkages:
  • Boosting consumption through wage growth, especially in lower-income segments, is viewed as pivotal.
  • MSME growth, lower capital costs, and higher employment income are identified as prerequisites for a sustainable growth cycle.

Policy Directions for Inclusive Growth

• Addressing Gender and Labor Issues:
  • Deregulating sectors deemed "risky" for women and fostering capital- and labor-intensive growth in balance can bridge gender divides and enhance job creation.
• Building MSME Competitiveness:
  • Shifting from micro to medium enterprises will require removing incentives to stay small and investing in human capital and infrastructure.
• Leveraging Consumption as a Driver:
  • With profitability soaring, companies are encouraged to recalibrate wage policies to spur spending, ensuring a robust demand-side foundation for growth.

Prelims Takeaways

• GDP (Gross Domestic Product)
• MSMEs (micro, small and medium enterprises)