If there is any standout feature of the Economic Survey 2024-25, it is its acknowledgment of the bottlenecks to growth and investment. The Survey cites three core concerns. First, it flags the absence of a business-friendly ambience for MSMEs as a constraint to growth, and exhorts the States to clean up the regulatory clutter. Coming in the wake of corporates not delivering on the tax concessions given to them by investing more or spending on its employees (also a theme of this Survey), the focus on MSMEs, battered by shocks in the intervening years, becomes important.

Second, the Survey also acknowledges that while India remains a strong FDI destination, it “must pay heed to numbers” in terms of rising repatriation, which implies that a greater effort is needed to ramp up FDI inflows. In a situation where “capital flows are going to be problematic”, a sustainable level of current account deficit may not be 2.5-3 per cent of GDP “but much lower”, it says. Third, it also points to the impact of AI on jobs as an area to watch out for, opting for sobriety over euphoria. In short, the Survey indicates to the Centre, and more explicitly the States, that ease of doing business must embark on its second leg for growth and investment to take root.

Interestingly, the Chief Economic Advisor said at Thursday’s press briefing that instead of addressing weak consumption demand directly, it is important to fix underlying growth bottlenecks. The Centre tried to improve ease of doing business with the Jan Vishwas Act 2023, which decriminalised 183 business related provisions, which the Survey tries to take forward. It says States should systematically deregulate laws relating to land, building, local trade and commerce, labour welfare, among other areas. It suggests that onerous and outdated laws relating to factories, contract labour, shop laws, land revenue, land ceiling, warehousing and logistics policies can be deregulated after comparing these laws with those in other States or countries.

However, there is a hint of the Survey placing the entire onus for driving reforms on the State governments, while also exhorting the corporates to do more. The ideas for energy transition such as reducing food waste, car-pooling and greater use of public transport are practical, but may not materially help energy transition goals. The growth projection for FY26 between 6.3 and 6.8 per cent appears prudent. This is in line with the projections of multilateral agencies such as the IMF and the World Bank. The first advance estimate for FY25 projecting growth at 6.4 per cent appears achievable given the revival in rural consumption. While the Survey has voiced concerns over CAD, its implications for rupee management or interest rates (the Fed has paused rate cuts this week) are not clear. Amidst this air of general global apprehension and slight external account worries, the Budget will have to balance growth and fiscal prudence.

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