Highlights - India delivers economic survey ahead of budget

NEW DELHI (Reuters) - The finance ministry delivered a report on the state of Asia's third-largest economy on Wednesday, a day before Prime Minister Narendra Modi's new government presents its first budget.

The annual report was prepared by Ila Patnaik, a well-respected economist who was appointed as senior economic advisor to the finance ministry in April.

Following are highlights of the report:

FISCAL DEFICIT

* India needs sharp fiscal correction

* Fiscal situation of the central government is worse than it appears

* Need for subsidy reforms for fiscal consolidation

* Recommends raising tax-to-GDP ratio for fiscal consolidation

* Shortfall in revenues can be contained through better mobilisation and reforms

* External debt remains within manageable limits

GROWTH

* GDP growth seen at 5.4-5.9 pct in 2014/15.

* Downward risk to economic growth due to poor monsoon, external factors.

INFLATION

* Wholesale Price Index (WPI)inflation expected to moderate by end-2014

* Government needs to move towards low and stable inflation through fiscal consolidation

* Consumer Price Index (CPI) inflation showing signs of moderation

* Needs to create a competitive national market for food

SUBSIDIES

* Rationalization of subsidies such as fertilizer and food essential

* Need to shift subsidy programme from price subsidies to income support

TAXATION

* Government needs to move towards simple tax regime, fewer tax exemptions, single rate of goods and services tax

FOREX MARKET

* Intervention in forex market by Reserve Bank of India is behind accumulation of reserves "generally"

(Compiled by Tommy Wilkes and Aditya Kalra; Editing by Douglas Busvine)