Eco Survey sees 7% GDP growth

Projecting a seven per cent growth in 2005-06, the government's pre-budget Economic Survey today outlined reforms in tax, expenditure and labour laws as a priority in the budget and favoured opening up of more sectors, including retail, to FDI to push up investment.

Identifying agriculture, infrastructure and employment as areas for big-ticket public investment, the 2004-05 Survey stressed the need for maintaining low interest and inflation rates and integrating the whole country towards a common market.

The survey, tabled in the Parliament today, was hard hitting on the
fiscal situation of both the centre and states and proposed major tax and expenditure reforms, cutting down wasteful subsidies to reduce fiscal and revenue deficits.

It said customs duties should be aligned to Asean levels to enhance competitiveness and fuel export growth and tax exemptions be phased out along with bringing in more services into the tax net to make up for the lowering of both direct and indirect tax rates.

"Both the centre and states need to improve their tax administrations to have an impersonal and hassle-free regime, with low compliance cost for honest tax payers and a high risk for the evaders," it said suggesting a phased rationalisation of central sales tax to remove tax on inter-state sales.

To transform Indian manufacturing into globally competitive units, the survey said there was a strong case to revisit the issue of FDI caps in sectors like coal, mining, insurance, real estate and retail trade.

The survey said the growth performance of the economy during 2003-04 and 2004-05 indicated a possible ratcheting up of the trend rate of economic growth from around 6% to about 7% per year.

Yet, vigourous efforts are needed to accelerate growth to achieve the CMP mandate of ensuring that the economy grows at least 7-8% per year in a sustained manner over a decade.

On inflation, the survey said there is a downward trend, particularly for agro-based products during january-march every year, due to seasonality of prices. The current year is no exception to this general trend.

On FDI, it said opening up retail sector would not only organise a significant part of the largely unorganised retailing, but can also invite established global retail brands into the domestic market, creating greater outlets for sourcing and marketing Indian products.

"Organised retail formats will also help in upgrading the quality of products, establishing efficient supply chains from farm to market and generating greater employment," it said.

The survey said growth projection of 6.9% this year has surpassed all projections made at the beginning and early part of the year. The current account of the balance of payments has turned into a deficit showing an excess of investment over savings.

Asserting there are five issues that needed to be addressed to step up investment, it said apart from pushing up agriculture development, simplifying procedures, relaxing entry-exit barriers and removing infrastructure bottlenecks be given top priority.