Economic Survey hits some right notes amid global economic uncertainty

Undeniably, the backdrop for the Economic Survey this year is more complicated. The global windshield is mistier, and these are indeed “interesting’’ times for the global economy.

 

Political changes are inducing uncertainties, and, hence, global narratives have become very fluid and volatile. All of this would obviously entail constant policy repricing further vitiating the outlook.

 

The first thing that stands out from the Survey is its realism when it comes to growth expectations. It cautions that ‘business as usual’ carries the risk of growth stagnation. It also persists with a ‘range’ rather than a point forecast during times of heightened uncertainty.

 

 

The growth forecast for FY26 is pegged in the range of 6.3-6.8 per cent, which seems realistic and in line with consensus expectations. It also lists out longer term measures to make the growth trajectory sustainable.

 

Secondly, there is a sense of continuity. The Survey has maintained the broader contours and directional thrusts espoused in its earlier editions. It has in fact, continued to pursue the chain of thought on some of the past themes. Last year, it had argued that India should welcome Chinese FDI to spur manufacturing and exports and to integrate with global value chains. It takes that argument forward to say that deregulation is the need of the hour and will lower cost of doing business, make resource use efficient and boost output and employment. It focusses on review and amendment of complicated procedures at the grassroots level for industry and MSMEs and it argues for Indian ‘Mittelstands’ to drive innovation, foster high-quality manufacturing, and create a robust export economy. More importantly, it must be noted that deregulation is easier said than done as is the realised experience despite a dire need to reduce business costs at every step.

 

Notably, the Survey reiterated that India needs a continued step-up of infrastructure investments to achieve the goals of Viksit Bharat 2047. It emphasises the need to ensure higher private participation in infrastructure by improving their capacity to conceptualise projects and their confidence in risk and revenue-sharing mechanisms, contract management, conflict resolution and project closure.

 

Another interesting facet that has been touched upon is the role and responsibility of private sector. It argues that social stability and long-term profitability rest on the private sector finding right balance between Capital and labor deployment, more so now than ever with the rapid deployment of AI and also argues for a fairer distribution of incomes and profits.

 

However, it is important to remember that profits and growth are the oxygen of business and without the right balance, it could hurt medium term prospects. Interestingly, it doesn’t well upon issues such as privatisation.

 

Similarly, the Survey had suggested last year that monetary policy should consider targeting inflation excluding food. It has followed up to argue that India’s agriculture is the ‘sector of the future’ and crucial for economic growth and food security providing a few known long-term suggestions.

 

Other areas it touches upon is labour flexibility balanced with worker rights and liberalising higher education although it does not dwell upon the fact that allocation to education has stagnated over the last several years even as expenditure on the social sector has been going up as a share of expenditure and also as a share of GDP.

 

The Survey also calls for stepping up R&D investments in general by the private sector and especially in areas related to battery storage technologies, CCUS, recycling and disposal of waste.

 

It also argues that to achieve long-term sustainable growth India should embrace a diverse approach. The advancement and deployment of low-emission thermal power technologies, including Advanced Ultra Super Critical (AUSC) power plants, will play a pivotal role in this transition. Increasing share of renewables (solar & wind) as well as adopting a diversified energy mix must provide baseload power, ensuring grid stability with nuclear, thermal and natural gas.

 

It is known that the suggestions of the Survey are not binding on the government but as Kingdon’s public policy model shows, wherever the troika of problem recognition, policy proposals, and political circumstances intersect, one can certainly expect some traction.

 

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The author is group chief economist, L&T. Views expressed are personal