 "Economy")
The pre-Budget Economic Survey for 2024-25 made a strong case for “deregulation,” particularly at the state level, to spur capital formation and drive employment and output growth.
Against a backdrop of rising protectionism and global trade uncertainty, the survey — tabled in the Lok Sabha by Finance Minister Nirmala Sitharaman on Friday, a day before presentation of the 2025-26 Union Budget — advocated for a second wave of Ease of Doing Business reforms (Ease of Doing Business 2.0). Given concerns over artificial intelligence’s (AI’s) potential to disrupt labour markets, the survey appealed to corporate India to deploy the technology sensitively, mentioning that negligence could necessitate policy intervention and taxation.
Authored by Chief Economic Adviser V Anantha Nageswaran and his team, the survey projected economic expansion at 6.3-6.8 per cent in the 2025-26 financial year, short of the 8 per cent growth India must sustain for a decade to achieve the “Viksit Bharat” goal by 2047. The forecast for FY26 suggests only a little change over the 6.4 per cent growth expected for 2024-25, according to Advance Estimates. The previous survey had anticipated GDP expansion in the 6.5-7 per cent range for the current financial year.
“Lowering the cost of business through deregulation will make a significant contribution to accelerating economic growth and employment amidst unprecedented global challenges,” the survey stated. It said the government “getting out of the way” and allowing businesses to focus on their core mission can help foster innovation and enhance competitiveness.
It also underscored the need for corporate profit growth to align with wage growth, warning that sharp disparities between the two pose risks to the economy by curbing demand.
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Despite companies maintaining a stable Ebitda (earnings before interest, taxes, depreciation, and amortisation) margin of 22 per cent over the past four years, wage growth has lagged, the survey noted. “This uneven growth trajectory raises critical concerns. Wage stagnation is pronounced, particularly at entry-level IT positions,” it stated.
To attract greater foreign direct investment (FDI), the survey suggested India must “pull out all the stops” to improve tax certainty and stability.
These measures, it argued, would enhance investment efficiency and help India sustain 8 per cent annual growth over the next decade — critical to reaching the “Viksit Bharat (Developed India)” target. This would require generating approximately eight million jobs a year, integrating Indian businesses into global value chains, and increasing manufacturing’s share in the economy.
As fears of AI-driven job losses grow, the survey pressed India Inc to act with heightened social responsibility. It warned that the impact of AI on India’s labour market would be more pronounced than in other nations due to the country’s population size and low per capita income. The Finance Ministry’s document cautioned that if businesses fail to handle AI adoption with “sensitivity”, there will be growing demand for policy intervention and sharing of fiscal resources to compensate those replaced and this will be “irresistible”.
“The state, in turn, has to resort to taxation of profits generated from the replacement of labour with technology to mobilise those resources, as the IMF suggested,” the survey warned.
Asked whether the survey advocated such a tax, Nageswaran clarified at a press conference that this was a hypothetical scenario. “But (taxing the companies) is not what is hinted at in the survey at all,” he explained.
With global trade uncertainty persisting, the survey stressed the need for stronger domestic growth.
It observed that most regulations require businesses to some money to ensure and demonstrate compliance, coupled with foregone entrepreneurial opportunities. In this regard, the survey recommended that states reduce compliance burden, streamline regulatory systems, liberalise standards and controls — such as removing restrictions on women working in factory processes — and establish legal safeguards for enforcement. It also suggested lowering tariffs and fees and shifting toward risk-based regulation.
Amid setbacks in land acquisition laws and uncertainty over labour codes, the survey suggested states prioritise land, labour, and building deregulation to enhance the ease of doing business. Regulations in these areas, it noted, shape decision-making across industries.
The survey also identified other regulatory hurdles affecting enterprises, including restrictions in utilities (electricity, water, municipal laws), transportation (motor vehicle laws, logistics), commerce (agriculture produce and livestock market laws), and environmental controls (air and water pollution laws). Additionally, it called for deregulation in excise, food safety, and legal metrology.
Highlighting the economic toll of over-regulation, the CEA and his team urged states to conduct data-driven assessments of the time, resources, and risks businesses must navigate to remain compliant.
Such deregulation, the survey argued, would empower India’s “Mittelstand” — small and medium enterprises (SMEs) — to compete effectively, bolster states’ resilience to economic shocks, enhance manufacturing capabilities, attract long-term investments, and stimulate growth. The resulting expansion, it said, would be both sustainable and “employment-sensitive”, ultimately improving workers’ long-term welfare.
To enhance economic competitiveness, India must accelerate domestic investment and attract foreign capital. This challenge is heightened by China’s growing dominance in global manufacturing —accounting for a third of worldwide factory production — and its rapid advances in critical technologies, such as robotics, aerospace, marine engineering, and new-energy vehicles.
China’s manufacturing prowess, the survey warned, exposes India to potential supply chain disruptions, price fluctuations, and currency risks. “It means going all out to attract, promote, and facilitate further domestic and foreign investments that India needs to become a competitive and innovative economy,” it stated.
The survey cautioned that this would not be easy, given that India is competing not just with emerging markets but also with advanced economies determined to retain their industries. It also recommended the private sector to adopt a strategic, long-term approach to strengthening domestic supply chains.
The survey also highlighted lopsided agriculture priorities and advocated for the right set of policies, such as allowing farmers to get unimpeded price signals from the market to reduce the overproduction of cereals and address the underproduction of pulses and edible oil. Besides, farmers need to have market mechanisms to hedge their price risks, it emphasised, saying these measures would help check inflation in such items.
