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The first among the priorities is for the private sector to increase employee compensation and arrest the shift in hiring from regular to contractual labour. The CEA says employee compensation has become “weaker and weaker,” with earnings growth vastly outpacing wages in the last four years.
“There has to be a better balance in terms of the share of income going to capital in terms of profits and the share of income going to workers as wages. Without this, there will not be adequate demand in the economy for corporate’s own products to be purchased,” Nageswaran observed.
Similarly, to boost consumption, the CEA said some of the shift in hiring by the corporate sector needs to be looked into, particularly when the annual average wage growth for contract labour has not kept pace with inflation.
“Post Covid we have seen a creeping informalisation of the workforce; this exerts a downward pressure on consumption because if companies shift more towards contact labour rather than hiring on a full-time basis, the human capital doesn’t grow,” Nageswaran said.
The CEA has also exhorted the private sector to give up using “jugaad” to get things done and focus on a medium- to long-term strategy to improve the quality of their products.
“We also have to abandon the recourse to the word “jugaad,” I think it is a suboptimal approach,” the CEA said.
“I also spoke about our lack of thinking for a medium- to long-term approach; we are myopic in nature and that is reflected in the quality of our products. And more importantly, we need to think big.”
Ananth Nageswaran also said deregulation of compliances will continue to be the big focus of his upcoming economic survey.
“We touched upon it quite a bit in the eco survey in July and that is going to be the big theme; deregulation or letting go is the big theme for the coming eco survey as well,” the CEA said.
Nageswaran gave the example of building guidelines in states that businesses need to adhere to. He said SMEs may not have even 1% of land available for actual production if they have to satisfy all the conditions.
The CEA also said the MSME ecosystem needs to move away from the “tyranny of thresholds,” as the lure of concessions is preventing companies from growing big.
“When we have a lot of concessions given to companies on a threshold basis, many of them unfortunately choose to stay below the threshold and continue to enjoy those concessions. So one way to look at it is not to have thresholds on an absolute basis but to make the thresholds move in tandem with the GDP. We will continue to explore these themes in greater detail in the economic survey as well,” Nageswaran said.
The CEA also said the private sector needs to step up spending on R&D, the focus for which should be maximisation and not optimisation.
The CEA also said with India entering into a world of difficult export growth, integration of China into India’s supply chain will be important.
“…you can’t get out of the sense of being part of the China supply chain to become part of the global supply chain. We first need to resolve the question of how we integrate China into our supply chain before we think of how to integrate ourselves into the global supply chain. It’s a challenge because they have made themselves extremely indispensable and important in the global supply chain. This is going to be a very important issue to tackle.”
