Eco Survey pegs growth at a conservative level of 6.1-6.7 pc

New Delhi, February 27, 2013: Cautioning that global developments would continue to impact India's growth story, the Economic Survey on Wednesday pegged the growth rate for 2013-14 at a conservative level of 6.1-6.7 pc.

"...the overall economy is expected to grow in the range of 6.1 to 6.7 per cent in 2013-14," the pre-Budget Economic Survey tabled by Finance Minister P Chidambaram in Parliament said on Wednesday.

The economy is projected to grow at 5 percent in current fiscal, the lowest in a decade. It was 6.2 percent in 2011-12 and 9.3 percent a year ago.

The projections for the next fiscal takes into account normal monsoon, moderation in inflation rate and mild recovery in global growth.

"While India's recent slowdown is partly rooted in external causes, domestic causes are also important," it said, adding boost to consumption coupled with supply side constraints led to higher inflation.

It said the growth story is unlikely to get support from the global economic developments and would remain tied to movement in international oil prices.

Chief Economic Advisor Raghuram G Rajan in his introduction to the Survey said: "These are difficult times, but India has navigated such times before, and with good policies it will come through stronger."

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

Referring to the price situation, the Survey said that elevated food inflation would continue to remain an area of concern with inflation rate gradually inching towards double digit in December 2012.

Major Highlights of Economic Survey 2012-13 tabled in the Lok Sabha:

1.    The downturn is more or less over and the economy is looking up
2.    GDP growth pegged at 6.1 pc - 6.7 pc for 2013-14
3.    GDP growth rate in current fiscal estimated at 5% in 2012-13
4.    Calls for widening tax base and prioritising expenditure to check fiscal deficit
5.    Govt priority to fight inflation by reducing fiscal impetus to demand as well as by focusing on incentivizing food production.
6.    Priority of govt to fight high Inflation
7.    Headline WPI inflation may decline between 6.2 to 6.6 per cent in March 2013
8.    More jobs in low productivity construction sector
9.    Balance of Payments under pressure with net exports decline
10. Service sector has shown more resilience despite global slowdown
11. Pitches for hike in price of diesel and LPG to cut subsidy burden
12. Railway freight grows by 5.1 per cent in 2012-13
13. Economic Survey calls for curbing import of gold to contain current account deficit
14. Foreign Exchange reserves remains steady at USD 295.6 Billion at December 2012 end

Prepared by a team of economists led by Chief Economic Advisor Raghuram Rajan, the Economic Survey pitches for speeding up economic reforms to activate a sluggish economy.

The Economic Survey is customarily tabled in Parliament by the Finance Minister a day before the General Budget for the coming fiscal year.

The document serves as an indicator of what is likely to be contained in the General Budget proposals.

On the taxation front, the survey pitches for early implementation of the Goods and Services Tax (GST) and the Direct Taxes Code (DTC), with a view to expanding tax base and raising tax-GDP ratio.

The issues like surge in gold import and widening Current Account Deficit (CAD) too are figured prominently.

Noting that fiscal deficit target for the current financial year would be "breached substantially", the Survey underlined the need for curbing government expenditure.

Such a step, it added, would also help in containing inflation, especially in the food items which has pushed retail inflation to near double digit mark.

"With the subsidies bill, particularly that of petroleum products, increasing, the danger that fiscal targets would be breached substantially became very real in the current year. The situation warranted urgent steps to reduce government spending so as to contain inflation", it said.

The government had pegged the fiscal deficit for the current fiscal at 5.1 per cent of the Gross Domestic Product (GDP).

In view of rising expenditure and subdued revenue collection, Chidambaram raised it to a more realistic level of 5.3 per cent.

The Minister had proposed to bring it down to 4.8 per cent for 2013-14.

Some announcements in this regard could be made in the Budget to be unveiled in Lok Sabha on Thursday.

The Survey said that there was across the board slowdown in all sectors during 2012-13 leading to problems in other areas of economy, especially revenue collection.

"Another consequence of the slowdown has been lower-than-targeted tax and non-tax revenues".

It, however, expressed the hope that measures announced by the government in the recent months would help in restoring the fiscal health of the government and check widening CAD.

The government has recently partially deregulated diesel prices, allowed FDI in multi-brand retail and liberalised foreign investment norms for various sectors.

"With the global economy also likely to recover somewhat in 2013, these measures should help in improving the Indian economy's outlook for 2013-14", the Survey said.