Economic Survey 2023-24 mentions focus areas like productive jobs, skill gap, green transition, China problem

The Economic Survey 2023-24 tabled in Parliament on Monday has identified six key policy focus areas for the government to achieve sustainable economic growth.

The six areas where the government will focus are productive job creation; skills gap, harnessing the full potential of the agriculture sector, reducing compliance requirements and financing constraints faced by MSMEs, managing India’s green transition, and the persistent challenge from China.

Structural reforms undertaken by the Indian government since 2014 have put the economy firmly on a growth path, and India is set to soon become the world’s third largest economy.

The Economic Survey said that if the government can carry forward the structural reforms undertaken in the last decade, the Indian economy can grow at a rate of more than 7 per cent on a sustained basis in the medium term.

Emphasising on productive job creation, the survey document said that productive jobs are crucial for growth and inclusion.

India’s workforce is estimated to be around 565 million, of which over 45 percent are employed in agriculture, 11.4 percent in manufacturing, 28.9 percent in services and 13.0 percent in construction.

However, to create such large numbers of jobs, conditions need to be created for rapid growth of productive jobs outside agriculture, especially in organised manufacturing and services, as well as improving productivity in agriculture.

Skills Gap Challenge:

“65 per cent of India’s rapidly growing population is under the age of 35 and many of them lack the skills needed for a modern economy,” the survey said, citing the World Bank’s 2023 report.

“Estimates show that about 51.25 percent of youth are considered employable. In other words, about one in two is still not readily employable after graduating from college. However, it should be noted that this percentage has increased from about 34 percent to 51.3 percent over the last decade.”

Harnessing the full potential of the agriculture sector:

The Economic Survey document said the agriculture sector is facing structural problems that have implications for India’s economic growth, despite its central role in India’s development trajectory.

“The biggest concern facing the sector is to sustain agricultural growth without allowing food price inflation to rise beyond acceptable limits, while encouraging farmers to increase production.”

The survey suggested that there was a need to address several other issues, such as improving the pricing mechanism for agricultural produce, increasing efficiency, reducing hidden unemployment, addressing the problem of fragmentation of land ownership, and enhancing crop diversification.

Regarding MSMEs, a vital sector of the Indian economy, the Economic Survey states that the sector faces extensive regulatory and compliance requirements and faces significant barriers to access to affordable and timely financing, which is one of the key concerns.

“The licensing, inspections and compliance requirements that MSMEs have to deal with, particularly those imposed by sub-national governments, prevent them from growing to their potential and creating jobs.”

Managing India’s Green Transition:

The path to green transformation in India requires ensuring consistency of e-mobility policy with expected and optimal energy mix between conventional and renewable sources; ensuring grid stability to make e-mobility widespread; developing or acquiring storage technology at affordable cost to increase the share of renewable energy in power generation.

At COP26 held in 2021, India committed to an ambitious five-part “Panchamrut” pledge. This included reaching 500 gigawatts of non-fossil power capacity, generating half of all energy requirements from renewable sources, reducing emissions by 1 billion tonnes by 2030.

India aims to reduce the emissions intensity of GDP by 45 percent. Finally, India is committed to net-zero emissions by 2070.

Among other things, the Economic Survey suggested recognising and addressing the challenges posed by dependence on China for critical minerals, which are crucial raw materials required for e-mobility and renewable energy generation.

“Last but not least, India has to tackle not only climate change and energy transition but also protectionism from developed countries.[p1] the survey said.

Regarding the problem of China, the report said that its dominance over global supply chains across various product categories is a major global concern, especially in the light of supply disruptions caused by the war in Ukraine.

It said that China’s near-monopoly on the production and processing of critical and rare minerals was already a cause of global concern.

“Against this backdrop, it is perhaps not the most prudent approach to think that India can make up for the loss to China by vacating some of the manufacturing space. In fact, recent data raises doubts about whether China is even vacating light manufacturing. The questions before India are: (a) Is it possible to integrate India into global supply chains without getting itself integrated into China’s supply chain? And (b) What is the right balance between importing goods from China and importing capital? As countries try to reshore and friendshore, India’s policy choices with respect to China are becoming tougher.”

Union Finance Minister Nirmala Sitharaman tabled the Economic Survey 2023-24 in Parliament today. The Economic Survey document, prepared by the Economic Division of the Department of Economic Affairs in the Ministry of Finance and under the supervision of the Chief Economic Adviser, gives an insight into the state of the economy for 2023-24 (April-March) and various indicators and some outlook for the current year.

Sitharaman will present the Union Budget for 2024-25 in Parliament tomorrow. With this budget presentation, Sitharaman will surpass the record set by former Prime Minister Morarji Desai, who as finance minister presented five annual budgets and one interim budget between 1959 and 1964. Sitharaman’s upcoming budget speech will be her seventh.