New Delhi, February 27
Citing the need for more reforms, the government has projected a growth rate of 6.1-6.7 per cent for the next fiscal. It has advocated several measures such as cutting subsidy on diesel and LPG, curbing gold imports, introduction of Goods and Services Tax (GST), reviving investments, enhancing job creation and widening of the tax net to restore the economy’s growth trajectory.

The projected growth figure is much higher than the present 5 per cent that the economy is expected to clock this year. The Economic Survey presented in Parliament today by Finance Minister P Chidambaram lists out several reform steps needed to stabilise the economy. The Survey suggests that the downturn is over and the economy is reviving.

"These are difficult times but India has navigated such times before and with good policies it will come through stronger. The slowdown is a wake-up call for increasing the pace of actions and reforms," Raghuram G Rajan, Chief Economic Advisor and lead author of the Survey, said.

To meet challenges to the economy, he prescribed shifting national spending from consumption to investment, removing bottlenecks to investment, growth and job creation, besides making efforts to reduce the cost of funds.

The Survey notes that the government needs to contain the fiscal deficit especially by shrinking wasteful and discretionary subsidies. "Controlling the expenditure on subsidies will be crucial. The domestic prices of petroleum products, particularly diesel and LPG need to be raised in line with their prices prevailing in the international market," the Survey said.

In addition, delays in getting permissions for projects need to be curbed so that investment can pick up. Implementation of GST, if approved, would create an integrated market and bring more producers in the tax net. Also, the direct benefit transfer scheme recently rolled out on the Aadhaar platform will target subsidies better.

Predicting that headline inflation may fall to 6.2%- 6.6% by next month, the Survey said elevated food inflation would continue to remain an area of concern as it inched towards double digits in December 2012. While last year, the inflation was driven by protein items, this year it has been due to increase in prices of cereals such as wheat, rice and maize.

Given the debate over the super rich tax, the Survey has argued that broadening the tax base is better rather than increasing tax rates significantly. Higher and higher tax rates impinge more and more upon incentives to undertake taxable activity while encouraging tax evasion. The Survey carried a special chapter focusing on jobs.