ECONOMIC SURVEY: FY06 GDP growth to be 8.1%

Cautioning that the economy's rosy outlook was not devoid of the risks of inflation, hardening interest rates and fiscal deficit, the pre-budget Economic Survey today prescribed hastening tax and labour reforms and measures to remove infrastrcuture bottlenecks to sustain high growth.

The 2005-06 Survey, tabled in the Parliament today, said the Indian industry needed to be unburdened from high level of taxes and distortive exemptions that provided perverse incentives. It also favoured levying user charges and cutting unwanted subsidies.

Simplification and digitisation of tax administration remains a pre-requisite for a transparent and hassle-free tax system, the Survey said.

The Survey projected economic growth of 8.1% during 2005-06 with new industrial resurgence, pick up in investment and modest inflation.

Identifying power shortage as the single most impediment to growth, the survey said appropriate policy initiatives constituted the first and foremost challenge for speedy infrastructure development.

It favoured liberalisation of the FDI regime for captive mining as a slowdown in the mining sector was of concern, especially coal, which accounted for 60% of the country's primary energy demand and 70% of power generation.

The management of lingering oil prices required rapid and bold policy responses, the survey said regretting that the movement towards market determined prices in the hydrocarbon sector has floundered pending resolution of subsidies for LPG and PDS kerosene.