Presenting the Economic Survey on Friday (January 31, 2025), Chief Economic Adviser V. Anantha Nageswaran, among other things, put forth a case for deregulation. According to him, “pervasive” deregulation would not only facilitate ease of doing business but also enable conditions for employment generation. He emphasised this an imperative, among other things, as a means to “raise our game in a new level playing field when globalisation is no longer going to provide the tailwind”.
Separately, the CEA emphasised about the role of private sector in nation-building and addressed concerns about the adoption of artificial intelligence (AI) urging companies weigh social costs as well.
Deregulation makes it easier for small, medium enterprises to grow
According to Mr. Nageswaran, deregulation at the local and state government level would not only be a boost to medium and small enterprises (MSMEs) but would also help lift manufacturing and facilitate GDP growth in the country.
The Chief Economic Advisor noted certain regulations affect small businesses “disproportionately”. He elaborated that adherence to certain operational restrictions raises the fixed cost of doing business, in turn, disincentivising more hiring. “These (regulations) affect the day-to-day activities of businesses that do not have the kind of bandwidth which large enterprises have – whether it is in land, building and construction, utilities, logistics and sector-specific areas”.
Mr. Nageswaran articulated deregulation entailed removing the fear of growth in micro, small and medium enterprises. “It is about plumbing the nuts and bolts of deregulation, which are primarily there in the state and local government space,” he stated, adding, “We must continue to augment internal capacities for growth, particularly agriculture sector which has the potential to contribute to 1% of GDP.”
Salary growth helps build aggregate demand
Reflecting the importance of private sector in nation building, the Chief Economic Advisor, among other things, argued for balanced deployment of capital and labour, fairer distribution of incomes and according importance to workplace culture, safety and mental health.
The CEA in his address pointed to an observed “huge disparity” between the growth of profitability among companies to their employment expenses in recent months. Arguing a case for private sector’s role in “raising the game for a new level playing field”, he pointed to automobile magnate Henry Ford’s reasoning to raise the minimum wages of workers to ensure people can buy their cars. The CEA explained, “In some sense, raising wage and salary growth for workers is also a source of building aggregate demand for businesses in the medium run as well…It is in enlightened self-interest rather than just being seen from a moral prism.”
Private sectors need to weight benefits of AI with social costs
The CEA contended that deployment of artificial intelligence presents both opportunities and challenges. “Sometimes we all feel that technology eventually generates more jobs. That is true, but the key word here is ‘eventually’,” he explained, adding, “What happens between now and then is critical, and this is where I think, we need to create supporting institutions, enabling institutions to train people, prepare them (for the AI advent) alongside a change in academic curriculums and workplace practices.”
Reflecting from technological transitions of the past, he held the private sector must weigh the benefits of artificial intelligence against social costs. “They may be subterranean in nature and surface over a longer period, eventually affecting the environment that is necessary for running business smoothly.”
Growth outlook between 6.3-6.8% for FY 2026
Mr. Nageswaran in the Economic Survey pegged the growth outlook for FY 2026 between 6.3% to 6.8%. He stated the risk factor emanated not only from global conditions but stock markets being volatile lately. “That is a factor we need to keep in mind because the massive growth in retail participation in the stock market may be a good thing but when the market corrects, it has implications on spending intentions and affects sentiments – which could be significant”.
Published – January 31, 2025 10:20 pm IST
