India's government sees room for big bang reforms and robust economic growth in the fiscal year ending March 2016, the Economic Survey 2014-15, released the Finance Ministry, said on Friday.
Economic growth is expected to exceed 8 percent in fiscal 2015-16 and, at market prices, the new estimate implies growth of 8.1-8.5 percent in 2015-16, the survey said.
The flagship annual document was prepared by the finance ministry's Chief Economic Adviser Arvind Subramanian. Finance Minister Arun Jaitley tabled the Economic Survey 2014-15 in parliament on Friday, ahead of the Federal Budget on Saturday.
Decisive shifts in policies, a persistent, encompassing, and creative incrementalism in other areas could cumulate to "Big Bang" reforms, the survey said.
"India has reached a sweet spot—rare in the history of nations—in which it could finally be launched on a double-digit medium-term growth trajectory," the report said.
Private investment should remain the primary engine of long-run growth. But in the interim, to revive growth and to deepen physical connectivity, public investment especially in the railways, will have an important role to play, the government survey said.
The government will adhere to the fiscal target of 4.1 percent of GDP in 2014-15 despite various challenges, it said. The government should meet the fiscal deficit of 3 percent in the medium-term, the survey recommended.
According to the survey, the budget should continue the process of fiscal consolidation, embedding actions in a medium-term framework. The government plans to achieve the target by expenditure control and expenditure switching from consumption to investment.
"From 2016-17, as growth gathers steam and as the GST is implemented, the consequential tax buoyancy when combined with expenditure control will ensure that medium term targets can be comfortably met," the survey said.
For 2015-16, CPI inflation is forecast in 5-5.5 percent range. The economy is expected to overcome the central bank's inflation target by 0.5-1 percentage point.
As the economy will over-perform on inflation, it would clear the path for further monetary policy easing. The government and the central bank need to conclude the monetary policy framework agreement to consolidate the recent gains in inflation control.
The outlook is favorable for the current account and its financing. Risks from a shift in US monetary policy and turmoil in the Eurozone need to be watched but could remain within control, the survey noted.
The current account deficit is estimated to be less than 1 percent of GDP in 2015-16.
The outlook for external financing is favorable, the report said. Financial inflows in 2014-15 are likely to be in excess of $55 billion, leading to a sizeable accretion to reserves to about $340 billion.
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