Economic Insights from Chief Economic Adviser
In a recent interview with the Times of India, Chief Economic Adviser V Anantha Nageswaran shared his insights on the Economic Survey for 2024-25. He discussed various pressing issues, including the role of the private sector, supply chain resilience, and the challenges posed by China’s dominance in multiple sectors. His comments shed light on the government’s strategies and the private sector’s responsibilities in fostering economic growth and stability.
The Role of the Private Sector in Economic Growth
Nageswaran emphasized the importance of the private sector in driving economic growth, particularly in the areas of capital expenditure (capex) and real wages. He noted that the post-COVID era has brought significant changes in hiring and compensation practices. The private sector must reassess these practices to align with demand growth and investment visibility.
He drew parallels with Japan’s post-World War II economic compact, where the government supported business expansion while employers guaranteed lifetime jobs and wage growth linked to productivity. Nageswaran believes that a similar compact is essential for India’s private sector. This compact should encompass not only hiring and compensation but also workplace safety, the sale of ultra-processed foods, and investment in research and development. The Economic Survey highlights these diverse needs, urging the private sector to take a more holistic approach to its responsibilities.
Addressing the Challenge of Ultra-Processed Foods
One of the critical issues raised in the Economic Survey is the increasing consumption of ultra-processed foods. Nageswaran pointed out that if consumer health declines due to these products, it could jeopardize long-term investment prospects in this sector. The government has proposed measures, including higher taxes on ultra-processed foods, to mitigate this risk.
The aim is to encourage healthier consumption patterns while ensuring that businesses remain viable. Nageswaran’s comments reflect a growing awareness of the link between public health and economic sustainability. By addressing the consumption of unhealthy foods, the government hopes to foster a healthier population, which in turn can contribute to a more robust economy.
Supply Chain Resilience and China’s Dominance
The Economic Survey also highlights the concentration of production in China and the need for India to enhance its supply chain resilience. Nageswaran urged policymakers and the private sector to think strategically about sourcing and production. He noted that the government has initiated several schemes, such as the Production-Linked Incentive (PLI) scheme, to promote domestic manufacturing capabilities in critical areas like solar power and battery technologies.
These initiatives aim to reduce dependency on China and build indigenous capacities. Nageswaran stressed that while building these capabilities takes time, it is essential for long-term economic stability. He encouraged businesses to consider alternative sourcing options and to invest in domestic production to strengthen India’s economic position.
The Need for Accelerated Reforms
Finally, Nageswaran addressed the critical need for accelerated reforms across various sectors. He highlighted the government’s ongoing efforts to improve the ease of doing business since 2014. Many states have implemented business reform action plans, leading to increased industrial activity.
However, he emphasized that the pace of these reforms must be quickened. The Economic Survey calls for a renewed focus on deregulation and the removal of barriers to business growth. Nageswaran believes that a more streamlined regulatory environment will attract investment and foster innovation, ultimately benefiting the economy as a whole.
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