Economic Survey 2024-25: India’s Growth Faces Global Headwinds, Calls for Deregulation and Private Sector Investment

GDP Growth Projected at 6.3-6.8% Amid Global Uncertainty

The Economic Survey 2024-25, released on January 31, projects India’s real GDP growth at 6.3-6.8% for 2025-26, reflecting moderate expansion in the face of multiple global and domestic challenges. The report highlights rising global protectionism, trade disruptions, sluggish private investment, and the growing impact of artificial intelligence (AI) on jobs as key concerns for economic stability.

The restrained growth outlook underscores the complexity of the current economic landscape, with geopolitical tensions, supply chain disruptions, and slowing capital inflows adding to existing pressures.

Call for Deregulation: “Government Must Get Out of the Way”

A major highlight of the Survey is its strong push for deregulation to boost business competitiveness and economic growth. It argues that the government should reduce regulatory burdens and adopt a more flexible, business-friendly approach.

Key Recommendations on Deregulation:

• Rolling back excessive regulations to foster innovation.
• Adopting risk-based regulation rather than overregulation.
• Shifting regulatory principles from “guilty until proven innocent” to “innocent until proven guilty.”

The Survey emphasizes that India’s complex regulatory framework and trust deficit in business environments hinder large-scale economic expansion and innovation. To counter this, it calls for simplifying rules and building institutional trust to enable faster economic growth.

Rising Protectionism and Trade Challenges

The Survey flags rising global protectionism as a major risk to India’s trade competitiveness. Tariff increases, trade restrictions, and evolving geopolitical alliances could disrupt India’s export sector and economic integration into global supply chains.

Trade-Related Risks Identified in the Survey:

• Escalating US-China trade tensions and their impact on global markets.
• Increased tariff barriers and reshoring trends affecting India’s exports.
• Supply chain disruptions leading to inflationary pressures and industrial slowdowns.

To counter these risks, the Survey suggests that India must enhance trade facilitation, reduce export costs, and focus on economic resilience through strategic partnerships.

Artificial Intelligence: A Major Disruptor in Job Markets

The Economic Survey highlights AI’s growing influence on the job market, raising concerns about potential large-scale job displacement in the IT and services sectors.

Key Concerns on AI’s Impact on Jobs:

• AI-driven automation could replace mid- and low-skilled jobs, particularly in IT, financial services, and customer support.
• India’s labor force must upskill to adapt to emerging technologies.
• The education system needs to emphasize critical thinking, digital literacy, and AI proficiency.

The Survey underscores the need for reskilling initiatives to prepare India’s workforce for an AI-driven economy, ensuring job security and sustained employment growth.

IBC 2.0: Strengthening the Insolvency and Bankruptcy Framework

The Survey calls for a revamped Insolvency and Bankruptcy Code (IBC 2.0) to support businesses, particularly micro, small, and medium enterprises (MSMEs), amid rising financial stress. High interest rates and strict macroprudential policies have constrained credit availability, making it essential to enhance the efficiency of bankruptcy resolution mechanisms.

Proposed Reforms for a Stronger IBC:

• A more efficient resolution process to free up capital and encourage investment.
• Greater financial access for MSMEs, which are critical to economic growth.
• A balanced regulatory approach to sustain long-term economic expansion at 7-8% growth over the next decade.

Stock Market and Economic Sentiment

India’s stock markets, often seen as indicators of economic momentum, have retreated from recent peaks, suggesting weaker business sentiment and investor caution. The Survey attributes this decline to global economic volatility, trade disruptions, and domestic policy uncertainty.

Outlook: Can India Overcome Economic Challenges?

With a moderate growth forecast, increasing global uncertainties, and AI-driven job market disruptions, the Economic Survey presents a cautious yet forward-looking perspective. It calls for:

• Policy reforms to improve the ease of doing business.
• A renewed focus on trade strategies to counter protectionist measures.
• Stronger private sector participation in investment and job creation.

The Survey’s findings come at a critical juncture, as India seeks to sustain high growth while navigating a volatile global landscape. Whether the government’s policy measures and economic strategies will be sufficient to drive long-term growth remains a crucial question in the year ahead.