2024 Has Been Good Overall, Reforms Can Make 2025 Even Better
2024 Has Been Good Overall, Reforms Can Make 2025 Even Better
India’s economy, taken under any yardstick, has done well in 2024, with the GDP growing at around seven per cent in keeping with its status as the world’s fastest-growing major economy. This was despite an unexpected low of 5.4 per cent in the July-September quarter. In spite of heavy selling by foreign portfolio investors (FPIs) in the latter part of the year, the stock market grew by around eight per cent. Infrastructure development also went apace, as roads got constructed at an everyday average of 27 km.
There was also considerable progress on the human development indices; tap water, for instance, reached 79 per cent of households. There is no reason to doubt why this progress should not continue in 2025; in fact, it can actually accelerate. We can move fast towards the target of a $5-trillion economy, provided due policy adjustments are made. These pertain to comprehensive reforms that cover the entire gamut of the economy—agriculture, industry, services, and technology. This should be done without losing focus on fiscal prudence, where the country has done generally well in the last few years. Agriculture, which remains a critical sector, employs nearly half of the workforce.
However, challenges such as statist policies, obsolete practices and inadequate market access remain the hindrances. Reforms can serve as a transformative tool to revitalize this crucial sector. Firstly, infrastructure should be modernized through investments in irrigation, storage and transportation in order to contain post-harvest losses. Secondly, promoting technology adoption, such as precision farming and digital platforms, can enhance productivity and market connectivity. Thirdly, the sector must be liberalized. Finally, measures like e-NAM must be duly encouraged.
The then UPA government had approved a National Manufacturing Policy in November 2011 “with the objective of enhancing the share of manufacturing in GDP to 25 per cent within a decade and creating 100 million jobs.” Sadly, this is yet to be achieved, as the contribution of manufacturing to GDP still hovers around 17 per cent. Manufacturing is important not just for a high growth rate but also for employment generation, given the sector immense potential towards achieving this. Realising this, the government developed the ‘Make in India’ programme with the objective to position India as a global manufacturing hub.
The other initiative, which began in 2020, was that of production-linked incentive (PLI) schemes for 14 key industries. The performance, however, has been very uneven. For example, of the total jobs created courtesy of the PLI schemes, about 75 per cent were in just three sectors—food processing, pharmaceuticals, and mobile phones (large-scale electronics manufacturing).
The services sector contributes maximum to the GDP and job creation. Areas like financial services, tourism and healthcare have been doing well. A new heartening development is that India is becoming a hub of global capability centres (GCCs), which can be improved upon by focussing on skill development promotion. In addition, the Centre must look into sector-specific issues, such as the incidence of high taxation in tourism. While expediting reforms, the government—nay, the entire political class—must also steer clear of regressive measures like retrospective taxation, which the GST Council is reportedly toying with. Avoiding such measures should be the avowed New Near resolution.