Deepanshu Mohan, dean and professor of economics at OP Jindal Global University and visiting professor at the London School of Economics, puts the Economic Survey 2025 in perspective for The Squirrels whose Sudeep Mukhia interviews him in the video above.
The Economic Survey 2025, presented to the parliament on January 31, 2025, outlines several challenges facing the nation's economy and proposes corresponding solutions.
Key issues identified
Employment generation: The survey emphasises the need to create approximately 7.85 million non-farm jobs annually until 2030 to accommodate the growing workforce. It notes that while the services sector remains a significant employer, the construction sector has gained prominence due to increased infrastructure projects. However, many construction jobs are informal and low-paid, highlighting the necessity for more formal employment opportunities, especially for individuals transitioning from agriculture.
2. Inflation: Retail inflation decreased to 5.4% in FY24 from 6.7% in FY23, attributed to effective administrative and monetary policies. Despite this improvement, core inflation remains persistent, driven by services inflation and a robust labour market, particularly in Asia.
3. Income inequality: The survey highlights that the top 1% of Indians earn 6-7% of total incomes, while the top 10% account for one-third. Addressing this disparity is crucial for inclusive growth.
4. Regulatory framework: A recommendation is made for financial regulators to implement formal impact assessment processes for their regulations. Currently, entities like the Reserve Bank of India and the Securities and Exchange Board of India operate independently without such assessments. Introducing a Regulatory Impact Assessment (RIA) agency could enhance transparency and responsiveness.
5. Market volatility: The survey warns that a significant correction in equity markets could adversely affect retail investor sentiment and spending. With retail participation at record highs, many new investors lack experience with substantial market downturns, posing a risk to economic stability.
Proposed solutions:
1. Boosting private investment: Creating a conducive environment for private sector investments is essential to stimulate economic activities across various sectors.
2. Expanding MSMEs: Focusing on the growth and expansion of Micro, Small, and Medium Enterprises (MSMEs) can drive job creation, foster innovation, and significantly contribute to GDP.
3. Agriculture as a growth engine: Implementing reforms to boost agricultural productivity, enhance farmer incomes, and ensure sustainable practices can transform agriculture into a major growth driver.
4. Green transition financing: Attracting investments in renewable energy, energy efficiency, and other green initiatives is crucial for sustainable development and environmental protection.
5. Bridging the education-employment gap: Aligning educational outcomes with market needs ensures that graduates are prepared for the evolving job market, addressing the disconnect between education and employment.
6. Building state capacity and capability: Enhancing the capacity and capability of state institutions is necessary for effective policy implementation and driving growth. This involves strengthening governance structures and improving administrative efficiency.
Additionally, the survey suggests that deregulation will be a significant theme, aiming to promote job creation and increase female workforce participation. For instance, reducing restrictions on occupations deemed risky for women could enhance their participation in the labour force.
The Economic Survey 2025 identifies critical challenges such as employment generation, inflation, income inequality, regulatory framework improvements, and market volatility. It proposes solutions including boosting private investment, expanding MSMEs, leveraging agriculture as a growth engine, financing the green transition, bridging the education-employment gap, and building state capacity to address these issues.