Union Budget 2025 | Private sector needs to relook at its hiring, compensation practices: CEA

The Economic Survey, tabled in parliament a day ahead of the Union Budget, provides an overview of the Indian economy, government policies and outlook for the upcoming financial year. This year’s report, prepared by a team headed by Chief Economic Adviser V Anantha Nageswaran, has flagged the need for deregulation and reforms at the grassroots level and pitched for measures to foster job creation and accelerate economic growth. In an interview with DH’s Gyanendra Keshri, Nageswaran said demand visibility is critical for boosting private investments. He also delved on the need for incentivising small and medium enterprises in order to accelerate growth and hiring. Edited excerpts:

To achieve the developed India by 2047 vision, the Economic Survey noted that the country’s GDP would require to grow at around 8 per cent on average for about a decade or two. How can that be done on a sustainable basis?

Deregulation is one aspect. Building on internal capacity, improving physical infrastructure, soft infrastructure, deregulating even agriculture and investing in mental health along with physical health, skilling, boosting MSME and manufacturing, these are all the avenues by which we can achieve an aspirational growth rate of 8 per cent. In the Economic Survey, we have talked about these in detail.

We are projected to have below 7 per cent growth for the second consecutive year in FY26. By when do you expect the growth to accelerate to 8 per cent on a durable basis?

It’s difficult for me to put a timeline on this.

Can you elaborate on the deregulation and policy reforms required, especially at the state level?

This is related to the factors of production like land and labour. Basically the focus has to be on bringing down the fixed cost of operation.

What are the measures required to increase private investments?

It’s not that the private sector is not investing. It is just that they can do more. They will do more only if there is demand visibility. The demand visibility in turn comes from investing, hiring and compensation. So they are mutually reinforcing. In the past few years the private sector has slowly ramped up investments. You will see it when the data for FY24 is released in February.

Do you expect the demand to be better in the coming financial year?

I think it will be, because in the last two years people were talking about K-shaped recovery and slowdown in rural demand. But rural demand is now doing very well. Now people are talking about urban demand. The urban demand is something, which we think can be addressed by the private sector having a relook at its hiring and compensation practices. Deregulation is also an important tool to boost demand because that will incentivise small and medium enterprises to hire more that in turn will lead to income growth and consumption growth.    

The report has warned about the cascading effect of US stock market correction on Indian stocks. Do you suggest small retail investors need to be more cautious?

How big the risk is, it’s difficult to quantify. Markets can always remain at a particular level even after many investment strategies. I don’t have a particular estimate on when it would happen and how much it would have an impact on. Therefore, it all depends on each individual’s exposure to the market, their risk appetite, their balance sheet etc. Our job is to put the information out there, analysis out there, the Economic Survey is not about offering investment advice.

Union Budget 2025 | Nirmala Sitharaman, who continues to be Finance Minister, will present her record 8th Union Budget this time. While inflation has burnt a hole in the pockets of 'aam janata', reports suggest there might be a tax relief for those making up to Rs 15 lakh per year. Track the latest coverage, live news, in-depth opinions, and analysis only on Deccan Herald. Also follow us on WhatsApp, LinkedIn, X, Facebook, YouTube, and Instagram.