By Dr. Gyan Pathak
Economic Survey 2023-24 does present a rosy picture of India’s growth story and recognizes the short-term prospect as good, but does not fail to flag several areas of concern that require clear forward-look vision for better prospect in the long term.
It underscored the pressing needs for comprehensive reform in agriculture. “Despite its centrality in India’s growth trajectory, the agriculture sector continues to face structural issues that have implications for India’s economic growth,” it said while identifying several key challenges facing the sector, including the need to sustain growth while managing food price inflation, improving price discovery mechanisms, and addressing land fragmentation. It says that policymakers must strike a delicate balance between incentivizing farmers to increasing production and keeping food prices within acceptable limits. This dual objective requires careful policy interventions.
Though the Economic Survey said that India labour market indicators have improved, it warns that artificial intelligence taking root in several spheres of economic activity and therefore steering technological choices towards collective welfare will be key. However, it puts onus on employers not on the government that they owe it to themselves to strike a balance between deploying technology and labour.
It says that many regulatory chokeholds, such as those related to land use, building codes, restricting sectors and hours open to women’s employment, hold back employment generation.
The Survey noted the volatility of Rupee, but said it is one of the least volatile, which is nothing but a way of consolation. In FY24, the US dollar gained against virtually every major peer. The Rupee also came under depreciation pressure. Further, it exhibited the lowest volatility in FY24 compared to the previous years, the document emphasizes.
It also refers to global impact of China on world economy, and says that the world cannot completely look past China, even as it pursues China plus one. In support of its derivation the Survey says that nations like Mexico, Vietnam, Taiwan and Korea, which were direct beneficiaries of the US’s trade diversion from China. Even while these nations increased their share to exports to the US, they also displayed a concomitant rise in Chinese FDI.
The example given has several hidden meanings in relation to India’s march towards “Viksit Bharat” (Developed India), and says it would be different from China’s economic boom between 1980 and 2015 – and it won’t be an easy road. It enumerates reason why?
It says that geopolitics was largely calm at the end of the Cold War, and western powers welcomed China and even encouraged its rise and its integration into the world economy. Globalisation was at the cusp of its long expansion, and concerns over climate change and global warning were not so pervasive or grave then as they are now. It points out the advent of Artificial Intelligence that casts a huge pall of uncertainty as to its impact on workers across all skill levels – low, semi, and high. These will create barriers and hurdles to sustained high growth rates for India in the coming years and decades. Overcoming these requires a grand alliance of union and state governments and the private sector.
As for Welfare economics of the country, it says we are moving forward with a reformed approach to welfare, focused on empowerment, saturation approach, universal access to necessities, efficiency, cost-effectiveness, and enhance participation of the private sector and civil society. The claims are however debatable, as far as their performance and intentions are concerned.
India’s external sector remained strong, the survey said, amidst on-going geopolitical headwinds accompanied by sticky inflation. Inflation in India is dealt with dual standard. On the one hand it admits that food prices were affected by adverse weather conditions in the last two years, and the net impact of these developments was elevated inflationary pressures in FY23 and FY 24. However, the inflation in FY25 or beyond is concerned, it estimates on normal climate conditions, and normal internal and external factors.
However, the Survey also admits, something beyond this, that is the medium to long term inflation outlook will be shaped by the strengthening of price monitoring mechanisms and market intelligence as well as focused efforts to increase the domestic production of essential food items like pulses and edible oils for which India has a great degree of import dependence. Achieving long-term price stability requires a clear forward-looking vision, it says. Hence assessing progress in developing modern storage and processing facilities for fruits and vegetables is crucial to manage seasonal price spikes.
Praising India’s growth story, the Survey says that India economy has recovered and expanded in an orderly fashion post pandemic. The real GDP in FY24 was 20 per cent higher than its level in FY20, is says adding, prospects for continued strong growth in FY25 beyond look good, but subject to geopolitical, financial market, and climate risks.
It further warns that any escalation of geopolitical conflicts in 2024 may lead to supply dislocations, higher commodity prices, reviving inflationary pressures and stalling monetary policy easing with potential repercussions for capital flows. This can also influence RBI’s monetary policy stances.
The survey warns of increased fragmentation along geopolitical lines and renewed thrust on protectionism may distort merchandise trade growth impacting India’s external sector. Global financial markets have scaled new heights, with investors are betting on global economic expansion. However, any corrections in elevated financial market valuations may have ramifications for household finances growth prospect. (IPA Service)
