Why in the News?

• India’s economy is projected to grow at 6.5% to 7% in the fiscal year ending March 2025.
  • The Economic Survey for 2023-24 highlights the need to address inequality and unemployment as policy priorities.

Policy Recommendations by Chief Economic Adviser (CEA)

• Regulatory Burdens: CEA V. Anantha Nageswaran advocates for Central and State governments to reduce regulatory burdens on businesses.
• Corporate Responsibility: He urges the corporate sector to create productive jobs, emphasizing their responsibility in generating employment.

Various Challenges discussed

(1) Challenges in the IT Sector:

• Slowdown in Hiring: The CEA notes a significant slowdown in IT sector hiring over the last two years.
• AI and Labor: He encourages the industry to use AI to augment labor rather than replace workers.

(2) Skilling Initiatives

• Addressing Inequality: The Economic Survey suggests steps to tackle inequality, improve health, and bridge the education-employment gap.
• Skilling Reboot: A reboot of India’s skilling initiatives is proposed to provide the industry with people having the right attitude and skills.

(3) Corporate Sector and Economic Growth

• Demand and Employment: The Survey emphasizes the benefits for corporates from higher demand generated by employment and income growth.
• Warning against Short-Termism: It warns against “short-termism” which can weaken economic linkages.

(4) State Capacity and Consensus Building:

• Enhancing State Capacity: Enhancing state capacity is critical for the strategy to work.
• Need for Consensus: The CEA stresses the need for consensus between governments, businesses, and the social sectors for effective transformation.

(5) Land Acquisition and Investment Concerns:

• Land Use Norms: While the Survey does not mention land acquisition reform, it highlights the need to deregulate land use norms and consolidate farmland holdings.
• Investment Cautions: The Survey cautions about private capital formation being cautious due to fears of cheaper imports, indirectly referencing China.

(6) Foreign Direct Investment (FDI) Challenges:

• Attracting FDI: Attracting FDI will be challenging due to higher interest rates and developed countries encouraging domestic investments through subsidies.
• Addressing Uncertainties: Despite progress, uncertainties related to transfer pricing, taxes, and import duties need to be addressed.

Structural Reforms

• Existing Reforms: Structural reforms such as GST and the Insolvency and Bankruptcy Code are delivering expected results.
• Next-Gen Reforms: The Survey calls for “next-gen reforms” that are bottom-up in nature to achieve sustainable, balanced, and inclusive growth.

Strategic Directions for Growth

• Six-Pronged Strategy: The Survey outlines a six-pronged strategy for growth, emphasizing private sector investments and a fair share of income for workers.
• Focus Areas: Other focus areas include financing the green transition, removing barriers for MSMEs, and implementing intelligent farmer-friendly policies.

Conclusion

• Sustained Growth Potential: The economy can grow at over 7% on a sustained basis in the medium term by building on past reforms.
• Tripartite Compact: Achieving this growth requires a tripartite compact between the Centre, States, and the private sector.

Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

Attend Now