 "India can grow at over 7% in the medium term, says Economic Survey")
The Indian economy can grow at more than 7 per cent on a sustained basis in the medium term if the country can build on the structural reforms undertaken over the last decade and carry out next-generation reforms that are bottom-up in nature, the Economic Survey 2023-24, tabled in Parliament on Monday, said.
The Survey, authored by the chief economic adviser in the finance ministry, V Anantha Nageswaran, along with his team of economists, “conservatively” projected the Indian economy to grow at 6.5-7 per cent in FY25, with risks evenly balanced, recognising the fact that market expectations were on the higher side.
On the downside, the Survey said, any escalation in geopolitical conflicts in 2024 may lead to supply dislocations, higher commodity prices, reviving inflationary pressures, and stalling the easing of monetary policy with potential repercussions for capital flows. “This can also influence the RBI’s monetary policy stance,” it added.
The Survey said the global trade outlook for 2024 remained positive, with merchandise trade expected to pick up after registering a contraction in volumes in 2023.
“Conversely, increased fragmentation along geopolitical lines and renewed thrust on protectionism may distort merchandise trade growth, impacting India’s external sector,” it cautioned.
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The Survey identified the areas of key policy focus and presented a six-pronged strategy to achieve the goal of medium-term economic growth.
“The strategy is premised on the understanding that the structural reforms of the last decade, focused on the supply side of the economy, have to give way to nextgen reforms that are bottom-up in nature to yield strong, sustainable, balanced, and inclusive growth,” the Survey said.
Primary among these strategies is to ensure that capital formation in the private sector grows organically and steadily, delivering endogenous growth in jobs and a fair share of income for workers.
Second, financing the green transition for India is an area where public-private partnerships will be critical.
“There need to be innovative financing instruments that can help mobilise private capital towards India’s transition efforts,” it added.
Third, as far as micro, small, and medium enterprises (MSMEs) are concerned, while bridging the credit gap remains a crucial element, the focus also needs to be on deregulation, enhancing physical and digital connectivity, and putting in place an export strategy that enables MSMEs to broaden their market exposure and scale up.
Fourth, the potential of agriculture to be an engine of growth, development, and equity has to be exploited through farmer-friendly policies that are environmentally and climatically sustainable.
Fifth, India’s education policies and skill policies should adopt a laser-like focus on learning and skilling outcomes and need to be aligned with one another, as well.
Lastly, enhancing state capacity and capability is critical to ensure that the growth strategy achieves fruition. “Sustaining and accelerating India’s progress in the face of evolving challenges requires dedicated investment in state machinery to reinvent and reinvigorate itself,” it added.
Aditi Nayar, chief economist at ICRA, said the Survey implicitly stressed that in the medium term growth needed to be supported by the private sector as well as state governments.
“Managing inflation, on the other hand, is not just the prerogative of the Reserve Bank of India, and would require active intervention by the Centre, especially in food-price management. The realisation of both these paradigms is crucial to ensure an optimal growth-inflation mix over the medium term,” she added.
Chandrajit Banerjee, director general, Confederation of Indian Industry, said the Survey was pragmatic in its approach and offered a futuristic vision to move India towards achieving “developed-economy” status by 2047.