De-Regulation to boost Indian Economy: Economic Survey 2024-25

Context: Globally, there is a shift from an era of hyper-globalisation to increased protectionism and strategic competitiveness among countries. In this backdrop, the Economic Survey 2024-25 prescribed reforms through de-regulation and increasing private sector participation.

Relevance of the Topic: Prelims: Economic Survey- State of Economy, Measures to boost economy

Highlights of Economic Survey 2024-25

• Growth Rate:  The Survey predicted India’s economic growth to be between 6.3-6.8% in 2025-26.
  • The forecast falls short of both the previous Economic Survey’s 6.5-7% projection and the RBI’s 6.6% estimate for 2024-25.
  • Its growth projection for FY26 is lower than the ADB’s forecast of 7% but in line with the World Bank’s (6.7%), the IMF’s (6.5%) and Fitch Ratings (6.5%). 
  • The Statistics Ministry expects the economy to grow at 6.4% in 2024-25.

• Viksit Bharat can only be achieved with 8% growth for at least a decade. The survey prescribes a 4 pillar strategy to achieve higher growth in the new playing field, marked by protectionism and strategic competitiveness among countries.

Reforms prescribed by Economic Survey 2024-25:

• De-Regulation:
  • The Survey strongly advocates for de-regulation, guided by a broad laissez faire approach of ‘getting out of the way’ principle.
    • It recommends the government to stop micromanaging economic activity and to embrace risk-based regulations.
    • Changing the operating principle of regulations from ‘guilty until proven innocent’ to ‘innocent until proven guilty’.
    • Simplifying regulations that affect businesses. E.g., Adoption of Business Reform Action Plan (BRAP) formulated by the Department for Promotion of Industry and Internal Trade (DPIIT). 
  • Focus on Ease of Doing Business 2.0, pushing on de-regulation as a pathway to employment generation. It recommends labour with a flexibility of working hours.
• De-regulation by States: The Survey has called upon States to begin de-regulation exercise by:
  • Identifying regulations that affect decision-making in enterprises
  • Comparing their regulations on these issues with those in other States and countries
  • Examining the economic impact of their current regulation on a single sample enterprise.
• In Ease of Doing Business 2.0, States must work on:
  • liberalising standards and controls
  • setting legal safeguards for enforcement
  • reducing tariffs and fees
  • applying risk-based regulation 

• Private-sector participation in nation building:
  • Bridge the Profit-Wage Gap:
    • The Survey suggested an equipartition of profits by the private sector to ensure better wages for workers.
    • Despite companies achieving a stable EBITDA margin of 22% over the last four years, wage growth has moderated.
    • Aligning profit growth with wage increases is essential for sustaining demand and supporting corporate revenue and profitability growth in the medium to long run.
  • Creating Jobs: While corporate profits have climbed 22.3% in FY24, employment grew by a mere 1.5%.

• Augmenting internal capacities: Enhancing economic freedom for individuals and small businesses to bolster India’s medium-term growth prospects.
• Urgent Indigenisation for India’s EV sector:
  • India will need to focus on indigenisation of raw material and technology.
  • It highlights concerns over the need for imports to achieve transition to electric mobility, even as the global automobile industry looks to reduce its dependence on China.

Read more: Key Takeaways from Economic Survey 2024-25