Explained: What is Economic Survey’s strategy for boosting wealth creation?

Explained: What is Economic Survey's strategy for boosting wealth creation?

A worker in New Delhi. (Express Photo: Praveen Khanna)

The big idea from the Economic Survey 2019-20 is the need to push towards increasing the number of wealth creators in the Indian economy. The Survey states that to achieve the goal of becoming a $5-trillion economy, the invisible hand of markets will need the support of “the hand of trust”.

What does that mean?

Essentially, this means that regulation and rules in the economy should be such that they make it easy to do business but not turn into crony capitalism.

The Survey states: “The invisible hand needs to be strengthened by promoting pro-business policies to (i) provide equal opportunities for new entrants, enable fair competition and ease doing business, (ii) eliminate policies that unnecessarily undermine markets through government intervention, (iii) enable trade for job creation, and (iv) efficiently scale up the banking sector to be proportionate to the size of the Indian economy."

How can this be done?

The Survey introduces the idea of “trust as a public good that gets enhanced with greater use”. In other words, it states that policies must empower transparency and effective enforcement using data and technology to enhance this public good.

A key element here is the need to increase the opportunities for new entrants. “Equal opportunity for new entrants is important because... a 10 per cent increase in new firms in a district yields a 1.8 per cent increase in Gross Domestic District Product (GDDP)”.

Another key aspect of such policies is to allocate resources in a way to ensure their optimal use. “Since resources are limited, a nation has to make choices. For example, given its demographic dividend, should India focus on labour-intensive industries or on capital intensive industries?” it states.

According to the Survey, the right policy mix can boost job creation. 'The survey finds that by integrating “Assemble in India for the world” into Make in India, India can create 4 crore well-paid jobs by 2025 and 8 crore by 2030,' it states.

Explained: Why is the Economic Survey important?

Is this push for wealth creators new?

No. This is an extension of what Prime Minister Narendra Modi said during his Independence Day speech in August last year, where he stressed on the need for the country to view “wealth creators” differently.

“Those who create wealth for the country, those who contribute in the country’s wealth creation — they all are serving the nation as well...We should not look at wealth creators with apprehension and doubt their intentions; we should not look down upon them,” had stated.

The PM had also said there was a need in the country to give such wealth creators due respect and credit. He had said that this change is required because “If no wealth is created, no wealth can be distributed”.

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