India will have to start looking inward — and crank up the domestic levers of growth because the era that saw a surge in world trade is over.

The Economic Survey has a stark message for the people in power: it may be time to jettison the dream of turning India into a global production hub for the world.

"The passing of the era of rapid world trade growth clouds the outlook for India’s export growth,” chief economic adviser V. Anantha Nageswaran has said in his preface to the Economic Survey for 2024-25 where he has pulled no punches.

The report is coming out at a time when US President Donald Trump has triggered alarm by threatening to impose high tariffs on Canada, Mexico and China — which could kick in as early as Saturday — and also extend it to India if it refuses to kowtow, wrecking the rules-based trading system that the World Trade Organisation put in place in 1995.

The chief economic adviser has said the Centre and the state governments need to “get out of the way” and allow businesses to focus on their core mission. The most effective policies that these governments can embrace is to "give entrepreneurs and households back their time and mental bandwidth".

“We have no other choice,” Nageswaran said, “but to get out of the way and trust people…. Wiping out the trust deficit in the country is imperative and government agencies have to set the agenda in this regard.”

The hard-hitting piece of advice comes amid clear signs that the Indian economy has shuddered into a slowdown.

The Survey has forecast real GDP growth between 6.3 per cent and 6.8 per cent in the next fiscal — lower than the 6.5-7 per cent forecast in last year’s Survey.

This is probably the first time anyone has unequivocally said that the real obstacles to progress are the Centre and the state governments themselves.

For a start, the authorities need to roll back regulations significantly and vow to“stop micro-managing economic activity”.

“That means changing the operating principle of regulations from ‘guilty until proven innocent’ to ‘innocent until proven guilty’,” Nageswaran said.

The regulations are needlessly complicated because of the “layers of operational conditions” that were tacked on to prevent abuse, he added.

“Enhancing economic freedom for individuals and small businesses is arguably the most important policy priority to define and bolster India’s medium-term growth prospects,” the Survey said.

Slowdown

Earlier this month, the National Statistics Office forecast growth at 6.4 per cent this year — the slowest since 2020.

The Survey said the country needed to achieve a growth rate of around 8 per cent at constant prices, on average, for about a decade or two if it truly aspired to become a developed economy by 2047. “While the desirability of this growth rate is unquestionable, it’s important to recognise that the global environment — political and economic — will influence India’s growth outcomes,” the Survey said.

Aditi Nayar, chief economist at ICRA Limited, said: “The real GDP growth forecast of 6.3-6.8 per cent suggests the Union budget will likely assume a nominal growth of around 10 per cent for FY26.”

IDFC First Bank’s chief economist, Gaura Sengupta, said: “The FY26 GDP estimate is realistic given muted external demand, while domestic policy space for fiscal and monetary support remains limited.”

The report, released a day before finance minister Nirmala Sitharaman presents her eighth budget, urged the Narendra Modi government to reduce regulations and asked the states to bring in labour and land reforms to improve the ease of doing business.

The Survey slammed big business for not doing enough to boost wages. Nageswaran had said in his preface to last year’s Survey that the Indian corporate sector — “swimming in excess profits” — ought to seriously take up its responsibility to create jobs.

This year, the Survey has criticised Indian companies for not paying out enough by way of wages even though they have achieved “a stable EBITDA margin of 22 per cent over the last four years”.

The acronym stands for earnings before interest, tax, depreciation and amortisation, which is widely regarded as a measure of core corporate profitability.

“Wage stagnation is pronounced, particularly at entry-level IT positions,” the Survey said, harking back to former Infosys CFO Mohandas Pai’s recent criticism of infotech companies for exploiting freshers by offering them low pay for close to a decade while forking out as much as ₹50 crore to their CEOs.