CEA Nageswaran Sends a Clear Message to India Inc in Economic Survey 2024-25

Chief Economic Advisor V Anantha Nageswaran sent a clear message to India Inc. to do more to promote investments, innovation, and employment in the country. Continuing his stance from the last economic survey, Nageswaran is urging India’s private players to open their purse strings.  

The biggest push in the survey was to match profit growth with the pace of employment generation and wage hikes. According to the data, the profit-to-GDP ratio of Nifty 500 companies rose from 2.1% in the financial year 2003 to 4.8% in the last fiscal year. 

The survey noted, “Large corporations, especially in non-financial sectors, significantly outperformed their smaller peers in profitability. However, while profits surged, wages lagged. A striking disparity has emerged in corporate India: profits climbed 22.3 per cent in FY24, but employment grew by a mere 1.5 per cent.” 

The chief economist also highlighted the fact that the focus of corporations is on cost-cutting over workforce expansion.  

With the government focusing on fiscal consolidation to meet the target of 4.5% by FY26, the corporate sector has been asked to do the heavy lifting time and again. Speaking at an Assocham event earlier this month, Nageswaran had urged India Inc to invest more.  

“Corporates have used the profits to deleverage. Now, it is time to engage in a good combination of capital formation and employment growth as well. Without that, there will not be adequate demand in the economy for corporates’ products to be purchased. In other words, not paying workers enough will end up being self-destructive or harmful for the corporate sector itself,” he said.  

While the government is pushing Indian corporates to do more, there have been concerns of a consumption slowdown in the country which has added caution to India Inc’s strategic thinking. In the run-up to the Union Budget 2025, several key industry stakeholders called for the need to do more to boost consumption in the country.  

The Indian Economy witnessed a slowdown in the last few months, with the GDP growth falling to 5.4% in quarter 2. In the Economic Survey, GDP growth was pegged at 6.3%-6.8% which is far below the 8.2% surge recorded in the last financial year.  

Also Read | Why India Inc Should Increase its R&D Expenditure

But amid this environment, the CEA has called on the private sector to not only increase investment but also focus on innovation.  

The Economic Survey lauded the progress Indian manufacturing has made owing to initiatives such as Make in India. However, the report noted, “The industry has largely focused on assembly, with limited progress in design and component manufacturing.” 

Highlighting the limited progress, the CEA noted that the research and development expenditure in the country is concentrated in a few sectors. Moreover, the share of government in R&D expenditure is quite high as compared to other countries.  

According to government data, the public sector accounted for 50% of gross expenditure in research and development (GERD). The private sector accounted for just 41%. Compared to India, business enterprises accounted for 77% of GERD in China.  

In the last Union Budget, Nirmala Sitharaman had announced a Rs 1 lakh crore finance pool to boost innovation by private players in the country.  

From employment generation to expenditure on innovation, the message from the CEA was clear for Indian corporates. As India looks to return to 8% GDP growth, India’s top economist is calling for India Inc to meaningfully step up its game.