Deregulation as a Catalyst for Economic Growth
India’s Chief Economic Advisor (CEA), V Anantha Nageswaran, has stated that deregulation will play a central role in shaping the upcoming Economic Survey 2024-25, which will be presented alongside the FY26 Budget. According to Nageswaran, simplifying regulatory frameworks will make it easier for businesses to operate, driving both domestic growth and attracting foreign investments. He stressed that deregulation should not be seen as a one-time fix but as a strategic long-term goal to unlock India’s economic potential.
Despite the challenges posed by global economic uncertainties, Nageswaran emphasized that the 6.5-7% growth forecast for FY25 is still attainable. However, this growth will require addressing critical issues related to wages and consumption patterns, which have been impacted by recent shifts in the workforce structure.
The Informalization of the Workforce: A Barrier to Consumption
Post-COVID, India has witnessed a rise in contractual hiring over permanent positions, leading to a phenomenon Nageswaran calls “creeping informalization” in the corporate sector. This shift has had a negative impact on wage growth, with wages failing to keep up with inflation, causing a reduction in consumer spending. According to Nageswaran, these trends are exerting downward pressure on the overall economy.
To restore economic balance, the CEA suggested that corporations must review their hiring practices and wage structures to ensure that wages align with inflation rates, which will stimulate consumption growth.
Wage Corrections: Boosting Consumption and Economic Stability
One of the key recommendations from Nageswaran is the need for a correction in wage structures to ensure that wages grow in line with the cost of living. This correction is critical for boosting consumer spending, which is an essential driver of economic growth. Increased disposable income would lead to higher consumption, encouraging businesses to ramp up production, thus fostering economic stability.
The CEA also highlighted the importance of addressing the wage gap to reduce disparities and promote equitable growth.
India’s Economic Roadmap: Deregulation and Workforce Reforms
India’s economic growth forecast for FY25 remains positive, with the government aiming for 6.5-7% growth. However, Nageswaran reiterated that this growth can only be achieved through regulatory simplification, targeted wage reforms, and addressing the informalization of the workforce.
The combination of deregulation and wage reforms would provide the necessary boost to domestic consumption and investment, driving the country toward a more resilient and diversified economy.
Key Recommendations by CEA V Anantha Nageswaran:
Deregulate key sectors to create a business-friendly environment.
Adjust wage structures to stimulate consumer spending and savings growth.
Address the shift toward informal work and ensure fair wages.
Foster economic stability through strategic reforms.
Saathee Global
