Akhil Vaani | Economic Survey 2025: Deregulation As The Key To Transformative Growth In Uncertain Times

Written By :

Last Updated:February 01, 2025, 11:27 IST

Raising the growth rate over the next two decades will require harnessing the demographic dividend through a deregulation stimulus

Throughout the Economic Survey, deregulation remains the central theme to catapult India towards Viksit Bharat by 2047.

On 31 January 2025, V. Anantha Nageswaran, the Chief Economic Adviser to the Government of India, laid before Parliament the Economic Survey 2024-25. Before writing this piece, I decided to read this voluminous document carefully.

After internalising the 492-page report, encapsulating 13 comprehensive chapters (the chapter titles themselves are directional), I have no compunction in confessing that this Economic Survey will go down in the annals of independent India as a transformational pathfinder—one that presents a blueprint for India to become a developed country by 2047.

The Economic Survey’s overriding theme is embedded in its preface, aptly titled Driving Domestic Growth and Resilience Through Deregulation. The CEA writes candidly that the path for Bharat to become viksit is through “deregulation, deregulation, and more deregulation." He summarises this beautifully in his opening sentence: “Lowering the cost of business through deregulation will make a significant contribution to accelerating economic growth and employment amidst unprecedented global challenges."

Throughout the Economic Survey, deregulation remains the central theme to catapult India towards Viksit Bharat by 2047.

Before I delve into the Survey per se, it is important to set the context first.

GLOBAL CHALLENGES GALORE

Nageswaran upfront presents the context—the turbulence, disruption, and implosion globally that India must navigate to achieve its aspirations of becoming a developed country.

He also begins with a note of caution: as India seeks to steady and sustain the growth momentum that the economy has experienced post-Covid, it must contend with the existential reality that the era of India benefiting from rapid world trade growth is over.

This means that the global environment in which China grew its economy at an astronomical rate for decades—piggybacking on cheap exports and becoming the manufacturing capital of the world—is no longer viable. India must find its own mojo, its own “next practices", if it is to become a developed nation by 2047.

A HUMONGOUS JOURNEY AHEAD

The road ahead for India is exceedingly difficult. India’s per capita income is $2,697 (IMF, 2024), whereas the IMF’s benchmark for a developed nation is $23,380.

To achieve developed country status by 2047, India must grow annually at over 7.6 per cent for the next two and a half decades (India@100, RBI Bulletin, July 2023). However, since Manmohan Singh’s 1991 Budget, India has exceeded 7.6 per cent GDP growth only seven times, according to the IMF.

Given this reality, Nirmala Sitharaman must view the 2024-25 Economic Survey as a call for coordinated and accelerated purposive action.

INDIA’S NEXT PRACTICES—REIMAGINING DOMESTIC GROWTH LEVERS

On 23 September 2007, in his now-famous India@75 speech, the late CK Prahalad, legendary management guru, called upon India to invent its own “next practices"—to innovate and develop its own unique solutions. The 2024-25 Economic Survey must be read in that context, principally for the following reasons:

One, in the past, India’s export growth has been a high-beta play on global export growth. This pathway to rapid economic growth is no longer guaranteed.

Two, to become a developed country, India must tread a different path. That “next practices" path must prioritise domestic growth levers over external growth levers.

WHAT IT MEANS

This means that India must go all out to attract, promote, and facilitate accelerated domestic and foreign investment to drive growth in a competitive and innovative landscape.

Nageswaran warns that this pathway will not be easy, as India faces intense competition for investment not only from other emerging economies but also from advanced economies, which are determined to keep their businesses at home.

To achieve growth through domestic drivers, India must make substantial investments in strengthening its domestic supply chain capabilities and resilience. Alternative sources of supply, where possible, must be identified and nurtured, going beyond short-term cost considerations.

At a time when the era of rapid global trade growth appears to be a thing of the past, India must innovate, innovate, and innovate to serve its fast-growing domestic market, with gains from external trade becoming the icing on the cake.

DEREGULATE, DEREGULATE, AND DEREGULATE

But how can this be achieved?

The message from the Economic Survey is loud and clear: the philosophy of governance must undergo a fundamental transformation—getting out of the way—by freeing businesses and allowing them to focus on their core mission.

If innovation and enhanced competitiveness are to drive fast-track growth, both the Union government and state governments must act swiftly and decisively to release entrepreneurs and households from the chokehold of stifling regulation.

The bottom line of the Survey is the dismantling of the current regulatory regime, applying the cardinal jurisprudence principle: the ethos and operating principle of regulation must shift from guilty until proven innocent to innocent until proven guilty.

And the reason is existential: Adding layers of operational conditions to policies to prevent abuse makes them incomprehensible, and regulations needlessly complicated, taking them further from their original purposes and intent.

NO CHOICE

The emphasis of the Economic Survey is emphatic—it is time to dismantle the low-trust environment prevailing in the country, which gives rise to excessive verification, compliance, and reporting. And the reason is simple: Bharat no longer has a choice but to get out of the way and trust its people.

If this shift does not happen and Bharat continues with business as usual, it risks economic growth stagnation. Eliminating the trust deficit is imperative, and governments must take the lead in fostering trust and setting the deregulation agenda accordingly.

TAILWINDS AND HEADWINDS

The Survey acknowledges that, despite the recent slowdown, the Indian economy remains on a steady growth path, with its macroeconomic health indicators looking strong. As the country aims to accelerate economic growth in the coming years, it will benefit from the tailwind of robust balance sheets in the domestic corporate and financial sectors.

However, strong headwinds loom, as globalisation is in retreat. Therefore, raising the growth rate over the next two decades will require harnessing the demographic dividend through a deregulation stimulus.

THE LEVERS OF TRANSFORMATIVE CHANGE

The thirteen chapters present an agenda for transformative change—a path that Nirmala Sitharaman must pursue to make Bharat a developed nation with a $35-40 trillion economy by 2047, ensuring it stands alongside the world’s leading economies.

Each of the thirteen chapters is so comprehensive, and the directions for deregulation and reform are so emphatic and forward-looking, that they should be a must-read for any transformational finance minister on the eve of the Budget. I urge discerning readers to navigate through the Economic Survey one sentence, one paragraph, one page, and one chapter at a time.

Suffice it to say, the Chief Economic Adviser has set the agenda not only for this Budget but for those to come. Given its sheer value addition, I will deep dive into just one chapter: Chapter 5 – Medium-Term Outlook: Deregulation Drives Growth.

MEDIUM-TERM OUTLOOK: DEREGULATION DRIVES GROWTH

Before addressing the medium-term outlook, Nageswaran, in the first five chapters, clearly lays out the ground realities:

The country’s GDP in real terms is likely to grow at 6.4 per cent in FY2025—with lack of consumption growth and weak private sector investment acting as constraints.
There is a pressing need for faster growth through domestic deregulation, as geopolitical tensions, ongoing conflicts, and trade policy risks continue to pose significant challenges to the Indian economy.
While external conditions remain difficult, retail and food inflation continues to be a concern.
At its core, India must improve its global competitiveness through grassroots-level structural reforms and deregulation to reinforce its medium-term growth potential.

As the headline of Chapter 5 and the preceding paragraphs of this piece articulate, the only sustainable way to drive growth over the medium and long term is to deregulate. This must be understood in the following context:

The Survey recognises that for India to become a developed nation by 2047, it must consistently achieve a growth rate of around 8 per cent at constant prices.
To reach this growth target, the investment rate must rise to 35 per cent of GDP, up from the current 31 per cent.
It will be essential to further develop the manufacturing sector and invest in emerging technologies such as AI, robotics, and biotechnology.
India needs to create 7.85 million (78.5 lakh) new non-farm jobs annually until 2030.
The country must achieve 100 per cent literacy, enhance the quality of educational institutions, and develop high-quality, future-ready infrastructure at scale and speed.

And all of this must happen amid global economic upheaval and myriad domestic challenges.

Chapter 5 examines the India story and proposes policy responses, with a particular emphasis on the importance of domestic growth levers and the need to reduce the regulatory compliance burden—especially for individuals and small businesses, including MSMEs—to enhance economic freedom and bolster medium-term growth prospects.

The Survey explicitly states that the path forward lies in core structural reforms, and the most effective way to implement these reforms is to rely on internal engines and domestic growth levers, focusing on a central principle: the economic freedom of individuals and organisations to engage in legitimate economic activity.

Freed from excessive licensing, inspections, and compliance requirements, the people and small enterprises of India—driven by high aspirations and innate inventiveness—will find solutions to the pressing challenges of growth, employment, and development.

The need of the hour is to accelerate and amplify the deregulation agenda that has been unfolding over the past decade.

AREAS OF DEREGULATION

The chapter identifies the following areas for deregulation:

Legal Status and Administration – Municipal laws, citizen charters, accountability in public service delivery
Land – Land revenue, land reform, town and country planning, land ceiling
Building and Construction – Town and country planning, building byelaws, fire safety
Labour – Rules under Union Codes, factories, contract labour, shop laws
Utilities – Water, electricity, building byelaws, municipal laws
Transport – Motor vehicle laws, motor transport workers’ laws, carriage of goods
Logistics – Warehousing and logistics policies, building bye-laws
Buying and Selling – Agricultural Produce and Livestock Market Committee laws
Environment – Laws for the prevention and control of pollution of water, air
Sector-Specific Regulations – Excise, food safety, legal metrology

RATIONALE FOR DEREGULATION

In each of these areas, the Centre and/or states impose mandates, including permits, standards, price and quantity controls, fees and taxes, compliance requirements, inspections, and penalties. Every additional mandate increases costs, delays processes, and creates uncertainty for businesses, discouraging economic activity and hindering enterprise growth.

The Survey suggests reform actions such as liberalising standards and controls, revising licensing norms, modifying regulatory thresholds, removing barriers to enterprise growth, and instituting procedural safeguards. It further recommends that states undertake line-by-line revisions of regulations to grant businesses greater freedom in decision-making.

HEAVY LIFTING

The above deregulations, among many others suggested by the Economic Survey, are significant transformative reforms that require substantial efforts from both Sitharaman and state finance ministers through their upcoming budgets. It must be remembered that in the country’s federal structure, the Union finance minister can only do her part. The states must take the lead, as they account for two-thirds of expenditure and one-third of revenue.

Moreover, as the Survey highlights, in implementing such reforms, states must draw lessons from inter-state and international comparisons of regulations to identify growth-inducing opportunities. States can learn from each other’s recent deregulation experiences and innovative solutions to address common challenges. Examining the success of other states that have implemented deregulation could reduce the time spent on discovering effective strategies.

However, all these efforts must be tailored to India-centric and state-centric “next practices", as importing best practices from elsewhere will not suffice to elevate Bharat—a country of immense complexity—into the developed category within the next two decades.