Finance Minister Arun Jaitley tabled the Economic Survey of India for 2015-16 in both Houses of Parliament on Friday afternoon.
The survey has projected that the Indian economy will grow between 7 to 7.5 per cent in the next fiscal. The growth rate for the current fiscal has been pegged at 7.6 per cent, the fastest in the world. The growth rate could also accelerate to 8 per cent in a couple of year, the survey said.
The three-point agenda suggested by the Survey is to push GDP growth rate to 8-10 per cent include moving away from anti-market policies, make big investments in health and education and focus more on the agriculture sector.
The survey also pressed for reforms, subsidy cuts and sticking to fiscal consolidation timetable.
But the survey also raised an alarm that if the world economy remained weak, India’s growth will face considerable headwinds. It called the external environment challenging.
The next fiscal, it said, will be “challenging” as the government will have to allocate additional resources for implementing the Seventh Pay Commission award.
Inspite of challenges and lower than projected GDP growth rate during 2015-16, “the fiscal deficit target of 3.9 per cent of GDP seems achievable,” said the survey.
The Economic Survey for 2015-16 also made a case for carrying forward the reform process to achieve macro-economic stability.
On the domestic side, two factors can boost consumption, increased spending from higher wages and allowances of government workers if the 7th Pay Commission is implemented and return of normal monsoon.
At the same time, the survey listed three downside risks. Turmoil in global economy could worsen the outlook of exports, contrary to expectations oil price rise would increase the drag from consumption and the most serious risk is the combination of these two factors, said the survey.
“One of the most critical short-term challenges confronting the Indian economy is the twin balance sheet problem – the impaired financial positions of the public sector banks and some corporate houses. The twin balance sheet challenge is the major impediment to private investment and a full-fledged economic recovery,” the survey said.
The Survey said the rupee’s value must be fair, avoiding strengthening. Fair value, it said, can be achieved through monetary relaxation. It said that a 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.
(With inputs from PTI)