The shift from an era of hyper-globalisation to a new dawn of protectionism and strategic competitiveness among countries forming the contextual backdrop of policy-making, the Economic Survey on Friday estimated India to grow at of 6.3-6.8 per cent 2025-26. The Survey prescribed reform through de-regulation, augmentation of internal capacities, private sector participation and energy transition as four pillars of the strategy to achieve higher growth in the new playing field.
The Survey was tabled by Finance Minister Nirmala Sitharaman in the Lok Sabha. Its growth projection for FY26 is lower than ADB’s projection of 7 per cent while in line with the World Bank (6.7 per cent), IMF (6.5 per cent) and Fitch Ratings (6.5 per cent) for the next fiscal. The Statistics Ministry expects the economy to grow at 6.4 per cent during current fiscal.
While a broad laissez-faire approach that the Survey characterised as a ‘getting out of the way’ principle guided the strong advocacy of “de-regulation” and reform, including labour reforms with a flexibility of working hours being an important focus area, it simultaneously pushed the private sector towards equipartition of profits and better wages for the workers.
“Getting out of the way and allowing businesses to focus on their core mission is a significant contribution that governments around the country can make to foster innovation and enhance competitiveness… That means rolling back regulation significantly. That means vowing and acting to stop micromanaging economic activity and embracing risk-based regulations. That means changing the operating principle of regulations from ‘guilty until proven innocent’ to innocent until proven guilty’,” Chief Economic Advisor V Anantha Nageswaran wrote in the preface of the Survey.
Mixed bag
Simultaneously, the Survey pointed out that while corporate profits have climbed 22.3 per cent in FY24, employment grew by a mere 1.5 per cent. It highlighted the gap between wages for employees and profits of enterprises, noting that despite Indian companies achieving a stable EBITDA margin of 22 per cent over the last four years, wage growth has moderated.
“This uneven growth trajectory raises critical concerns. “Aligning profit growth with wage increases is essential for sustaining demand and supporting corporate revenue and profitability growth in the medium to long run,” Nageswaran said, addressing a press conference later.
On China’s dominance
Talking about China’s manufacturing prowess and strategic dominance, Nageswaran highlighted the concentration risk of one country becoming the dominant source of supply. “China’s share (of global output) will probably be higher than the combined share of the next 10 countries. That gives them a lot of strategic levers and advantages,” he said.
On the emerging contradiction between artificial intelligence (AI) and labour markets, the Survey said AI should be able to help rather than replace jobs. It said that some of the fears about AI being hugely disruptive to employment might be “misplaced”.