
The Economic Survey 2024-25 is shorter than last year’s survey by forty-two pages and is missing a few important promises held out for us last time. For example, last year’s survey had mentioned the ‘China Plus One’ strategy eight times. We have no reference to the strategy this year. Similarly, we have no reference to India’s rising ‘Global Value Chain Participation.’ We had an outline of growth vision and strategy for New India in the chapter on Medium-Term Outlook last year. There's no reference to growth vision or New India in the current survey.
“Harnessing the power of women entrepreneurs” when households are struggling
One of the most important positive changes is the discussion on real earnings and wages, which should have started many years ago. Unfortunately, the real average monthly earnings for regular wage/salaried males and female workers have steadily declined – down from 12,665 to Rs. 11,858 for men and from Rs. 10,116 to Rs. 8,855 per women workers, with the gap between men and women workers increasing from 25.2% to 33.9%.
The real average monthly earning has fallen for self-employed male as well as female workers – down from Rs. 9,454 to Rs. 8,591 for men and Rs. 4,348 to Rs. 2,950 for female workers, with the gap increasing from 117.4% to Rs. 191.1%. That is, self-employed women earn just about one-third of self-employed men and regularly employed women. We must also remember that 59.1% of women in the age group of 15-49 are anaemic (NFHS-5), up from 53.1% and 55.3% (NFHS-4 and 3).
But in the chapter on Employment and Skill Development, the Survey talks about “Harnessing the power of women entrepreneurs for India’s economic future”. A bit unrealistic to expect that – is that not?
Building a digital economy without computers and internet in schools
Unrealism does not end here, it extends to developing e-learning through digital pedagogy, and “Driving employment opportunities through the digital economy” when only 57.2% and 53.9% of schools had computer and internet. The survey also identifies the export of online education and international expansion of education as areas of focus, when online education firms are going bankrupt, and the quality of domestic education is still below par in science, engineering, and management schools.
We do hope that the budget team too is aware of these issues and will allocate the required resources and the ministry teams will spend them during the year to solve these problems, not just transfer them to another fund.
Corporate profits at peak, but promised growth in employment and investment yet to materialise
The Survey highlight the problem of profit growth sans wage and employment growth.
Referring to an SBI study, it mentions the “sharp focus on cost-cutting over workforce expansion.” The Survey chart suggests that the net profit and EBITDA for 4,000 firms has grown by 366% and 120.5%, respectively since FY 21. However, the wage growth has been just 55.86%, implying that an increasing share of earnings has gone to the shareholders and the public exchequer has funded it through lower taxes.
FPIs (Foreign Portfolio Investors) and the financial investors have been benefited by rerating of valuation ratios (Price-Earnings Multiple), which will always force the management teams to sacrifice the business’ long-term for their short-term trading gains.
The study also mentions that employment growth during FY 24 was just 1.5%.
It is not surprising at all – a large corporation is not likely to invest ahead of demand, given that the personal consumption expenditure is not likely to recover anytime soon, as discussed above.
Medium-Term Growth Outlook: IMF sees lower
The Survey relies on IMF projections to suggest that the Indian economy will achieve a nominal growth of 10.7% during the next five years, down from 12.4% during the last three decades. Our current year’s nominal growth is expected to be below 10%.
The Survey also cites the IMF’s estimate of 0.5% annual rate of INR depreciation as unrealistic, against 3.3% annual depreciation during the last three decades. The IMF seems to believe that either Indian inflation will not be too different from US inflation or India will become one of the most exciting destinations for financial capital.
How realistic are these assumptions?
“Getting out of the way” will help us “getting back into the fast lane”
The survey would like us to believe that we need to opt for greater deregulation, even when we know that this creates oligopolies, which in reality function as monopolies, as we are seeing across sectors in India as well as in the UK and the US. For example, the Indian telecom regulator required the Indian telecom oligopoly to unbundle data, i.e., pay for what the consumers use (TRAI asks telcos to offer tariff vouchers for calls, SMS).
It is surprising that the Survey makes a statement that “the state produces governance, and the private sector produces goods and services.” Given the IMF’s projections, cited by the Survey, we do not seem to be close to the fast lane, unless a growth rate between 6-7% is seen as being there! Getting out of the way will definitely build larger monopolies, followed by predatory pricing, as we have seen everywhere in the world.
What do we expect from the Budget?
We are dealing with a complex situation characterised by negative or stagnant growth in real households earnings, large corporations unwilling to invest, and MSMEs not having enough capital to invest. Hence we expect the budget to rely less on rhetoric and more on making a genuine effort to invest in solving the problem of malnutrition and lowering the cost burden arising from expensive transport, housing, education and healthcare.
It does not require coming up with new schemes or the renaming of old schemes, just the good old plan to invest in quality education, transport and health services in the public sector, as all successful, future-focused societies do. We do not need PLIs or tax cuts for large corporations, as they will not invest to create employment unless they see an acceleration in demand.