Presented ahead of the interim budget for FY25, the review identified education, health and energy security; reducing the compliance burden for small businesses; and improving labour market gender balance as the priority areas for future reforms.
It flagged the elevated risk of geopolitical conflicts as an area of concern.
The regular annual Economic Survey will be released only after the elections, by the next government ahead of its full budget. India’s economy is likely to grow 7.3% this fiscal year, according to the first advance estimate of the government released earlier this month, beating the forecast of economists and topping the 7% mark for a third straight year.
Physical and Digital Infra
Finance minister Nirmala Sitharaman will present the interim budget for fiscal 2025 on February 1.
India could emerge as the world’s third-largest economy with a gross domestic product of $5 trillion in the next three years and $7 trillion by 2030, the review report said. This will be a “significant milestone” in the country’s journey to deliver quality life and exceed people’s aspirations, it said.
The ministry also exuded confidence that the goal of turning India into a developed country by 2047 is achievable, given the persistent structural and substantive reforms.
Robust Demand
Robust domestic demand, driven by reforms, investment in both physical and digital infrastructure, and increasing manufacturing prowess will continue to spur economic growth going forward, the review said.
The sustained growth rates will get crucial support from the financial sector, which has rebounded from the bad loan crisis.
The review said ongoing swift physical infrastructure creation will allow the incremental capital-output ratio to decline, translating private investments into output quickly, while the rapidly growing digital infrastructure is continuously improving institutional efficiency.
The economy has also transitioned from the dominance of public investment to the co-existence of public and private investments, it said.
Key challenges
The reforms, the review report said, will be more purposeful and fruitful with the full participation of state governments, when governance will ensure changes at the village level, in sync with the spirit of cooperative federalism.
The review pointed to four critical challenges, mostly external, just when the economy approaches the ‘Amrit Kaal’, with the confidence that these challenges to growth and inclusive development would actually be “stepping stones and not obstacles”.
First, the “era of hyper-globalisation in global manufacturing is over” and exporting one’s way to growth will not be easy amid governments pursuing onshoring and friend-shoring of production.
The next is the challenge posed by the advent of artificial intelligence, since technology might remove the advantage of cost competitiveness that countries (including India) exporting digital services enjoy.
The third and most important challenge is that in the short run, there is a trade-off between economic growth and energy transition, the review report said.
The fourth challenge is in ensuring a healthy, talented and appropriately skilled workforce in the domestic industry, it said.
