Eco Survey predicts GDP growth at 6.5-7%, push for job creation, Chinese investment

New Delhi: The government’s pre-Budget Economic Survey, released on Monday, forecasted a conservative GDP growth rate of 6.5 to 7 per cent for the current fiscal year. The survey highlighted the need for increased job creation and advocated for greater Chinese direct investments to enhance exports.

Authored by the chief economic advisor’s office, the report suggested considering inflation targets that exclude food prices, which are more affected by supply issues than demand.

It also issued a cautionary note regarding the booming stock markets, noting that increased retail investor participation could lead to speculation driven by overconfidence and high return expectations.

Presented by Finance Minister Nirmala Sitharaman in Parliament, the Survey projected a GDP growth rate of 6.5 to 7 per cent for the fiscal year beginning in April. This is lower than the 8.2 per cent growth observed in the previous 2023-24 fiscal year and below the Reserve Bank of India’s (RBI) 7.2 per cent estimate for the current year.

Prime Minister Narendra Modi remarked that the Economic Survey underscores the strengths of the economy and the benefits of recent government reforms. He also noted that it identifies areas for further growth and progress as India aims to build a “Viksit Bharat.” Chief Economic Adviser V Anantha Nageswaran described the Indian economy as resilient amid geopolitical challenges, though he expressed concerns that cheaper imports from countries with excess capacity might hinder private capital formation.

Acknowledging the conservative nature of this year’s forecast, the Survey attributed it to slower private sector investment growth and uncertain weather patterns. It projected a potential for sustained growth above 7 per cent in the medium term if structural reforms are enacted.

The report, released just ahead of Sitharaman’s presentation of the 2024-25 Budget, highlighted priorities such as boosting private investment, supporting small businesses and agriculture, increasing funding for climate change adaptation, simplifying regulations for small businesses, and addressing income inequality.

The Survey emphasised the need to bridge the gap between education and employment and urged expedited labour reforms to foster job creation.

It stated that India must generate nearly 7.85 million jobs annually in the non-farm sector until 2030 to meet the needs of the growing workforce.

Nageswaran noted that job creation largely occurs in the private sector and that many factors influencing economic growth and productivity fall under state jurisdiction.

He called for a tripartite compact to meet rising aspirations and achieve the vision of a developed India by 2047.

He described Prime Minister Modi’s third term as an “unprecedented third popular mandate,” which signals continuity in political and policy frameworks. He also suggested that the government should streamline its regulatory burdens on businesses.

The Survey recommended increasing direct investment from China while reducing imports from the country.

It proposed focusing on Chinese foreign direct investment to boost exports, similar to strategies employed by East Asian economies.

Following the 2020 clashes in the Galwan Valley, India banned over 200 Chinese mobile apps such as TikTok, and rejected a major investment proposal from EV maker BYD.

Visas for Chinese nationals also slowed.

On inflation, the Survey indicated a benign short-term outlook and supported the RBI’s monetary policy framework that targets inflation excluding food.

The current CPI inflation rate stands at 5.08 per cent, while core inflation is around 3 per cent. The RBI has maintained interest rates steady for eight consecutive meetings to keep CPI inflation below 4 per cent.

The Survey suggested that issues arising from higher food prices for low-income consumers could be mitigated through coupons or direct benefit transfers (DBT). It also highlighted rising mental health issues, which impact productivity, and called for attention to these concerns.

Additionally, the report noted that the advent of Artificial Intelligence (AI) introduces significant uncertainty regarding its impact on workers across various skill levels. Nageswaran also called for a policy re-orientation of farm policies despite existing subsidies and support measures.