Three days before the budget, the Economic Survey today pegged the country's economic growth at a conservative level of 7-7.75 per cent for the next fiscal, while pressing for more reforms, subsidy cuts and sticking to fiscal consolidation timetable.
In contrast, the Survey of last year had project growth rate level of 8.1-8.5 per cent for the financial year 2015-16, ending March 31.
Tabled by Finance Minister Arun Jaitley in Parliament, the Survey also said that "credibility and optimality" favours sticking to next year's deficit target of 3.5 per cent of GDP.
It also called for expeditious implementation of the Goods and Services Tax (GST), which it described as an unprecedented reforms measure.
The Survey projected a growth rate of 7-7.75 per cent for the next fiscal as compared to 7.6 per cent expected in 2015-16, with downside risks from the weak global economic scenario.
It further said that the country would take a "couple of years" to achieve 8-10 per cent GDP, considered by experts as India's potential growth rate.
The next fiscal, it said, will be "challenging" as the government will have to allocate additional resources for implementing the Seventh Pay Commission award.
However, it projected the inflation to decline to 4.5-5 per cent in the 2016-17, within the Reserve Bank of India's target, while the current account deficit would remain low at 1-1.5 per cent of the GDP.
Also, it said, low inflation has taken hold and confidence in price stability has improved. Prospect of lower oil prices -- around USD 35 per barrel as compared -- over medium term is likely to dampen inflationary expectations.
The Survey said the rupee's value must be fair, avoiding strengthening. Fair value, it said, can be achieved through monetary relaxation.
Stating that gradual depreciation in rupee can be allowed if capital inflows are weak, it said India needs to prepare itself for a major currency readjustment in Asia in wake of a similar adjustment in China.
The pre-Budget document also proposed widening the tax net from 5.5 per cent to more than 20 per cent and favoured a review and phasing out of tax exemptions.
It projected capital requirement for banks at around Rs 1.8 lakh crore by 2018-19.
The government, it said, should sell off certain non financial companies to infuse capital in state-run banks.
Seeking to paint an optimistic picture of the economy amid
a gloomy global landscape, the Survey said that "India stands as a haven of stability and an outpost of opportunity" with regard to macro-economic factors and low inflation.
"India's economic growth is amongst the highest in the world, helped by a reorientation of government spending toward needed public infrastructure," it said, adding that the task ahead would be to sustain growth in an even more difficult global environment.
The three-point agenda suggested by the Survey to push GDP growth rate to 8-10 per cent include moving away from anti-market policies, major investment in health and education and more focus on agriculture sector.
The government, it added, has been able to pursue meaningful reforms and deal with "palpable and pervasive" corruption.
FDI has been liberalised across the board and vigorous efforts have been undertaken to ease the cost of doing business, it said, adding that stability and predictability has been restored in tax decisions reflected in the settlement of the Minimum Alternate Tax (MAT) imposed on foreign companies.
The Survey, however, expressed concern over delay in implementation of GST and shortfall in disinvestment target.
It asked the government to expeditiously rationalise subsidy which at present was "work-in-progress."
The Survey said that corporate and bank balance sheets remain stressed affecting the prospects for reviving private investments.
Elaborating on the global situation, it said that the upcoming budget and economic policy would have to contend with an unusually challenging and weak external environment.
