India’s underlining growth story intact; employment, wage growth to drive consumption: CEA Nageswaran

New Delhi  (The Uttam Hindu): India’s underlining growth story is intact and policy reforms over the past decade have begun bearing fruit, Chief Economic Adviser Dr V. Anantha Nageswaran said on Thursday. Stressing that employment and wage growth will drive consumption, Nageswaran said that, unlike past cycles of growth, India has been able to sustain its economic trajectory because of supply-side improvements that kept pace with demand growth. Addressing the ‘Bharat@100 Summit’ organised by Assocham in the national capital, the CEA mapped out strategies for improvement that call for the public and private sectors and academia to work in tandem. He stressed that "India’s underlining growth story is intact". "This is important as the country aspires to be a developed nation at a time when the global economic and political uncertainty poses a challenge," said the CEA.

Since India must increasingly depend on domestic growth for the next decade or two, all stakeholders – public, private sector and academia – must collaborate to make the vision of Viksit Bharat a reality, the CEA added. Giving a snapshot of India’s performance, Nageswaran spoke about vast improvements in the logistics space, India’s substantive jump in the global innovation index, the rapid financial coverage under the PMJDY (Pradhan Mantri Jan Dhan Yojana), and better outcomes in education. He emphasised the role the private sector and corporates can play in propping up consumption. "If consumption has to drive economic growth, then we must look at the post-Covid hiring trends, where there has been a shift to contractual labour. While these contracts are formal in nature – the workers receive employee benefits like provident fund and health insurance etc – but the wage growth for contract employees have not kept up with inflation," the CEA noted. Noting that corporate profitability was at a 15-year high in FY24, Nageswaran said that much of this income was being diverted by companies to reduce their leverage. “While it is good to improve balance sheets, corporate profitability and workers’ income growth has to be balanced,” he said, adding that, “without this parity, there will not be adequate demand in the economy for corporate products to be purchased.” On the question of whether India can become a manufacturing hub without China, Nageswaran was of the opinion that the right question to ask was - how to integrate China into our supply chains rather than how to integrate India into global supply chains. He also stressed the role that MSMEs (micro, small and medium enterprises) must play in raising India’s manufacturing share in the GDP to 25 per cent or more.