Emphasising that enhancing economic freedom for individuals and small businesses is the most important policy priority to bolster the medium-term growth prospects, the Economic Survey has called for significant deregulation and structural changes as the strategic call of the hour.
According to the Survey, the structural reforms and strategies across sectors needed to achieve the medium-term growth include creating an enabling policy and regulatory environment for upgrading the capacity and know-how of component manufacturers, increasing availability of trained manpower, addressing resource bottlenecks and regulatory impediments to accelerate gross fixed capital formation.
The wish-list also includes a strategy for growth and expansion of MSMEs by helping them expand via deregulation and policy actions at the state and local governments levels; undertaking reforms that help remove growth impediments in the farm sector and building state capacity and capability.
On the green transition the Survey has a slew of suggestions that focuses on adoption of new technologies instead of a complete abandon of the present, and a strategy to leverage the rapidly growing pool of global green capital from sovereign wealth funds, global pensions, private equity, and infrastructure funds for securing green transition finance.
“To succeed with these structural reforms, a fundamental pre-requisite is to accelerate and amplify the deregulation agenda already underway in the last 10 years and work towards giving people back their agency and enhancing the economic freedoms of individuals and organisations,” says the survey.
“While the desirability of this growth rate is unquestionable, it's important to recognise that the global environment, political and economic–will influence our growth outcomes, and given this “enhancing economic freedom for individuals and small businesses is the most important policy priority to bolster the medium-term growth prospects through deregulation,” says the survey.
Noting that of late, the focus of policymaking globally has shifted inwards, the survey says “the promise of shared benefits from a globalised world with open trade, free flow of capital and technology, and sanctity for rules of the game are behind us. It is as unwelcome and unfortunate as it is real.
“And the current tendencies in the rest of the world necessitate that we redouble our efforts to boost exports and attract investment. One way to do this is to benchmark ourselves to the rest of the world rather than our past. However, given the uncertain global environment and fraught geopolitics, expectations of the external sector's contribution to our economic growth must be realistic. Therefore, we need to intensify our efforts on the domestic front,” says the survey.
Also, worldwide there is a backsliding of economic integration with geo-economic fragmentation replacing globalisation. Therefore economic realignments and readjustments are imminent, says the survey, adding this domestic realignments have to come amidst the rise of China as the manufacturing powerhouse and its impact on the manufacturing aspirations of other nations, as well as the supply of minerals, materials, machinery, and equipment needed for energy transition, pose challenges.
“Amidst this, we are in the middle of a change that represents an unprecedented economic challenge and opportunity and therefore our policy responses have to be on leveraging the domestic growth levers and the shedding of regulatory compliance burden, because a business as usual approach will only add the risk of growth stagnation” warns the survey.
“It makes sense to trust the ingenuity of the people and organisations and using policy to enhance their economic freedoms, which will give impetus to growth in line with various growth projections. This also calls for specific aspects of systematic deregulation that need to be focused on to facilitate economic freedom for individuals and businesses so that our mediumterm growth prospects remain strong.
Achieving the developed nation tag by 2047 would entail sustained economic growth of close to 8% every year for at least a decade. To achieve this growth, investment rate must rise to around 35% of GDP, up from the current 31%. Additionally, it will be essential to develop the manufacturing sector further and invest in emerging technologies such as AI, robotics, and biotechnology. We will also need to create 78.5 lakh new non-farm jobs annually till 2030.
“Amidst this new and emerging global reality, the best way to succeed with these structural reforms is to start relying on the internal engines and domestic levers of growth, focusing on a central element–the economic freedom of individuals and organisations to pursue legitimate economic activity. Unburdened by licensing, inspection and compliance requirements, the people and small enterprises will find answers to the pressing challenges of growth, employment and development,” the survey concludes.