By Deregulation to Propel Economic Growth in FY25: Key Themes of Economic Survey
In a recent statement, Chief Economic Advisor (CEA), V Anantha Nageswaran, shared that deregulation will be a major focus in the upcoming Economic Survey 2024-25, which will be unveiled alongside the FY26 Budget. The government’s focus on simplifying regulations aims to foster an environment conducive to business growth and attract more foreign investments. This, Nageswaran believes, is critical for sustaining economic growth despite the volatile global economic landscape.
Despite these challenges, Nageswaran expressed optimism about India’s economic growth forecast for FY25, which stands at 6.5-7%. He emphasized that achieving this target will require strategic reforms, especially in wage structures and employment practices, to drive consumption and ensure economic stability.
Informalization of the Workforce: A Key Concern for Consumption Growth
Nageswaran discussed the growing trend of informalization in the workforce since the COVID-19 pandemic. More companies have opted for contractual workers rather than hiring permanent employees, which has caused wage stagnation. As wages have not kept pace with inflation, consumer spending has been under pressure. This has created a gap in demand that can hinder overall economic recovery.
The CEA underlined the importance of addressing this issue by adjusting the wage structure. If wages align with inflation, workers will have greater disposable income, leading to a surge in consumption, which is crucial for driving economic growth.
Wage Reforms to Stimulate Consumption and Boost Savings
One of the most pressing recommendations by Nageswaran is the need for wage reforms across various sectors. He emphasized that for consumption to become a driver of growth, it is essential to ensure that corporate wages are aligned with the rising cost of living. The adjustment in wage structures will not only improve worker satisfaction but also create a positive ripple effect on the broader economy.
These changes would encourage higher savings and increased spending, which will ultimately boost domestic demand and stimulate economic activity.
The Road Ahead: Combining Deregulation with Wage Reforms for Growth
India’s economic growth forecast for FY25 hinges on critical reforms, particularly in deregulation and wage structures. Nageswaran believes that these changes are necessary to unlock the country’s full economic potential and help it navigate both domestic and international challenges.
By addressing the informalization of the workforce and wage stagnation, the country can strengthen its economic foundations and position itself for sustained economic growth.
Key Takeaways from CEA V Anantha Nageswaran:
Deregulation is essential to create a business-friendly environment.
Adjust wage structures to ensure wages align with inflation to drive consumption.
Address the informalization of the workforce to maintain economic stability.
Foster economic growth by implementing strategic reforms that stimulate demand and investment.