Economic Survey calls for tripartite agreement to make India developed by 2047
A quick summary of what the 2023-24 Economic Survey says about the desired economic roadmap of the government
The government presented the Economic Survey for 2023-24 in the parliament today, estimating that India’s real GDP could grow between 6.5% and 7% in 2024-25. The Economic Survey, which is prepared by the Chief Economic Advisor’s Office in the Ministry of Finance has, over the years, evolved from being a commentary on the (fiscal) year that was to a peek into the government’s, or rather the CEA’s economic thinking, on the desired road ahead for the economy. Here is a quick summary of what the 2023-24 Economic Survey says about the desired economic roadmap of the current government.
Redefining the responsibilities of the government, capital and citizens…
“The tripartite compact that this country needs to become a developed nation amidst emerging unprecedented global challenges is for governments to trust and let go, for the private sector to reciprocate the trust with long-term thinking and fair conduct and for the public to take responsibility for their finances and their physical and mental health”, the Survey says, hinting that India’s economic rejuvenation is not something which can be achieved by a kneejerk shift towards complete or no regulation or markets.
The Survey flags areas for both the government and private capital including some which have been deemed as extremely successful by the current government.
For example, ease of doing business continues to be a problem area. “…notwithstanding the impressive strides made in the last decade, uncertainties and interpretations related to transfer pricing, taxes, import duties and non-tax policies remain to be addressed”, the Survey says while underlining the already difficult problem of attracting FDI on account of higher interest rates in advanced economies and growing geopolitical tensions.
To be sure, not all blame lies at the doorstep of the government. The Survey does make a criticism of the private sector as well, for not responding on intended lines to the government’s decision to reduce corporation tax rates to facilitate capital formation in the Indian economy.
“Private sector Gross Fixed Capital Formation (GFCF) in machinery and equipment and intellectual property products has grown cumulatively by only 35% in the four years to FY23. Meanwhile, its GFCF in ‘Dwellings, other buildings and structures’ has increased by 105%. This is not a healthy mix. Second, the slow pace of investment in M&E and IP Products will delay India’s quest to raise the manufacturing share of GDP, delay the improvement in India’s manufacturing competitiveness, and create only a smaller number of higher-quality formal jobs than otherwise”, it says.
It also warns about a turbulent future ripe with geopolitical and technological shocks. This warning comes at time when white collar service job generation might have peaked already. “While the boom in telecommunications and the rise of the internet facilitated business process outsourcing, the next wave of technological evolution might bring the curtains down on it. In this milieu, the corporate sector has a responsibility, as much to itself as it is to society, to think harder about ways AI will augment labour rather than displace workers”, the Survey notes.
Even if we were to handle the services challenges, things are still going to be difficult, because the world has changed fundamentally, the Survey argues. Its tone is pretty unambiguous on the gravity of the challenge.
“The global backdrop for India’s march towards Viksit Bharat in 2047 could not be more different from what it was during the rise of China between 1980 and 2015. Then, globalisation was at the cusp of its long expansion. Geopolitics was largely calm with the end of the Cold War, and Western powers welcomed and even encouraged the rise of China and its integration into the world economy. Concerns over climate change and global warming were not so pervasive or grave then as they are now. Fourth, the advent of Artificial Intelligence casts a huge pall of uncertainty as to its impact on workers across all skill levels – low, semi and high. These will create barriers and hurdles to sustained high growth rates for India in the coming years and decades. Overcoming these requires a grand alliance of union and state governments and the private sector”, the Survey says.
And these things have to be achieved without sacrificing macro-economic stability or thinking in binaries
“The Indian economy is on a strong wicket and stable footing, demonstrating resilience in the face of geopolitical challenges. The Indian economy has consolidated its post-Covid recovery with policymakers – fiscal and monetary – ensuring economic and financial stability”, the Survey notes while underlining the importance of factors such as “possibility of overconfidence leading to speculation (in financial markets) and the expectation of even greater returns, which might not align with the real market conditions” along with usual emphasis on fiscal and monetary stability.
The Survey also calls for guarding against “sterile” binaries such as “urban vs. rural, growth vs. equity or development, and manufacturing vs. services” and calls upon both the political class and the civil service to realise that “India needs multiple development pathways”.
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