Economy
Mint Primer: Hints on budget proposals from the economic survey
Summary
- The survey said the reforms that the government has pursued over the last decade have generated moderate to high growth.
The economic survey, the government’s most comprehensive annual analysis of the economy, is critical to shaping policy. Looking through the survey’s prism, Mint pieces together what the Union budget 2024-25 may have in store:
What is its prescription for sustained growth?
The economic survey ‘conservatively’ pegs 2024-25 economic growth at 6.5 to 7%. To sustain this pace, it has suggested areas to focus on—job and skill creation; easing of bottlenecks faced by medium, small and micro enterprises (MSMEs); tapping the full potential of agriculture; managing the green transition; tackling inequality and deepening the corporate bond markets. Importantly, it says there’s a need to change the reforms approach from a focus on the supply side of the economy to a ‘bottom-up approach’ for strong, sustainable and inclusive growth. Expect the finance minister to include most of these suggestions in the budget.
Read more: Economic Survey 2024 has three critical cues for the discerning investor
What is a bottom-up growth strategy?
The survey said the reforms that the government has pursued over the last decade have generated moderate to high growth. To sustain this growth “for nearly a generation up to 2047", it has suggested a different approach to reforms – a six-pronged bottom-up strategy. This comprises: boosting private investment, growth and expansion of MSMEs; recognizing agriculture as an engine of growth; removal of all policy impediments; securing the financing for green transition; bridging the education-employment gap; and building the capacity required for accelerating and sustaining India’s progress. This approach will accelerate growth and do so equitably.
What about inflation?
While complimenting the policy makers for tackling inflation effectively vis-a-vis other economies, the survey has suggested ways to handle food inflation which typically spikes due to seasonal increase in prices. It has called for the creation of modern storage and processing facilities for fruit and vegetables. The budget could see significant proposals towards this effort. In the long term it has called for higher production of pulses and edible oil.
Read more: Economic Survey: India seeks China FDI to boost electronics exports globally
Any ideas on job creation?
The economic survey claims that labour market indicators have improved significantly in the last six years with the unemployment rate dropping to 3.2% in 2022-23. The agro processing sector and care economy (creche and elderly care) are cited as promising candidates for sustainable job creation. The Survey has also laid the responsibility of creating jobs on the private sector, pointing out that corporate profitability is at a 15-year high. It remains to be seen how the finance minister approaches this particular problem.
Why is green transition a challenge?
Despite being the fastest growing large economy in the world, India’s annual per capita emission is just a third of the global average. Having committed to a Net Zero carbon emission target by 2070, it has become imperative that its high and robust economic growth is environmentally sustainable. The Survey points out that it is not easy to ensure stable clean energy production at a reasonable price because it also requires viable battery storage technologies and access to critical minerals. The budget should see allocations for this as India balances its development needs with a low carbon pathway.
