NEW DELHI: Pointing out that profits were at a 15-year high while real wages were stagnating, the pre-Budget Economic Survey on Friday suggested that companies, especially larger ones, should focus on higher wage growth, in line with rise in profitability. It said this was necessary to bridge income inequality and boost demand and growth.
The survey underlined govt's efforts to pump in large amounts of capital in building infrastructure and said it was the time the private sector "reciprocated".
In a strong pitch for deregulation, it said "getting out of way" is a "significant contribution" govts can make to boost innovation and competitiveness.
While it highlighted the need to be prepared for opportunities offered by AI, the survey also pointed to the adverse impact of the technology on labour surplus countries such as India and cautioned that govt may have to intervene through a tax in case of large corporate profits due to labour displacement.
Economic Survey projects up to 6.8% growth in coming year On boosting wage growth, CEA said in an interview to CNBC, "It is in the enlightened self-interest of corporates who are swimming in profits to take job creation seriously".
Estimating that India would need sustained 8% annual growth in GDP over a decade or two - significantly faster than post-liberalisation expansion so far - to realise its aim of becoming a 'viksit' nation by 2047, Centre's annual economic report card projected growth of 6.3 to 6.8% for the coming year and expected food inflation to ease by the end of the current quarter.
It proposed stringent checks on ultra-processed food, from breakfast cereals to packed juices and chocolate malt drinks, including possibility of higher GST rates, currently applicable to some sin goods. The survey pointed to the failure across the world of self-regulation by industry and called for enforcement of strong labelling.
Overall, however, the thrust of the team led by chief economic adviser V Anantha Nageswaran was on greater deregulation, by govt "getting out of the way", to lower the cost of doing business and help accelerate economic growth and employment creation amid strong global headwinds.
The most effective policies govts - Union & states - can embrace, it said, is to give entrepreneurs and households back their time and mental bandwidth. "That means rolling back regulation significantly," the survey said in one of the strongest ever pitches for light-touch regulation in recent years.
The pitch for deregulation was not limited to industry but extended to agriculture as well, with the survey asserting that unless this sector was freed up to look beyond water-intensive crops, reforms in the rest of the economy would be of little use. It cautioned that farm sector and its output could be adversely impacted by climate change and this needed to be factored in.
It said in today's world there is a growing recognition that the rules of the game have changed from the time when globalisation was the credo, and India would need to tailor policy to encourage indigenisation of key sectors to prepare for a time when multilateralism could fade and tariffs could zoom. The survey maintained that despite a challenging global environment of slowing trade and modest growth, Indian economy remains robust and in good fiscal health.
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