The Economic Survey on Friday projected revival of economic growth to 6-6.5 per cent next fiscal and suggested that the government should relax the budget deficit target to boost growth from a decade low of 5 per cent this year.
The Survey, released a day before Finance Minister Nirmala Sitharaman presents the Union Budget for 2020-21, suggested a cut in food subsidy to create fiscal space at a time when tax revenues were falling.
Facing the worst economic slowdown since the global financial crisis of 2008-09 that worsened job prospects, the Survey said businessmen should be respected as they create wealth and jobs.
For India to become a USD 5 trillion economy by 2025, it prescribed strengthening trust in the economy, enabling and empowering markets, promotion of pro-business policies, and measures to enhance farmers' income.
It also suggested reforms to make it easier to open new businesses, register property, pay taxes and enforce contracts.
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The Survey called for boosting manufacturing with 'assemble in India for the world' concept and underlined the need to spend USD 1.4 trillion in infrastructure to nearly double the size of the economy to USD 5 trillion.
It batted for aggressive disinvestment to bring higher profitability and efficiency, minimal government intervention in markets, encouraging entrepreneurship, and supporting wealth creation.
For the current fiscal, it projected a GDP growth of 5 per cent, the lowest in 11 years.
Commenting on the Survey, Prime Minister Narendra Modi said the report focuses on wealth creation for Indians. "It outlines a multi-faceted strategy to achieve a USD 5 trillion economy through enterprise, exports, ease of doing business and more," he tweeted.
Some economists believe the Survey's growth forecast is too optimistic as the recovery is likely to be slow and shallow amid rising inflation and declining investment.
The Survey has been wide of the mark in forecasting growth in four out of past five years.
"The deceleration in GDP growth can be understood within the framework of a slowing cycle of growth with the financial sector acting as a drag on the real sector," it said. "The government must use its strong mandate to deliver expeditiously on reforms, which will enable the economy to strongly rebound in 2020-21."
Survey-author Krishnamurthy Subramanian, Chief Economic Adviser to the Finance Ministry, rejected his predecessor Arvind Subramanian's analysis of India's GDP growth rate being overestimated by 2.7 per cent post-2011, saying the allegation was "unfounded" and "unsubstantiated by the data".
As has been argued earlier, the government has to prioritise growth, the Survey for 2019-20, which was tabled by Sitharaman in Parliament, said.
And for this, relaxing the fiscal deficit target could be considered, said the Survey -- an annual report card on the economy.
Sitharaman had projected the fiscal deficit at 3.3 per cent of the gross domestic product in her budget for 2019-20 but it is widely seen slipping to 3.8 per cent as the slowdown lowered revenue collections and the government provided a tax stimulus to spur investments.
This will be the third straight year when the government will miss its fiscal deficit target.
Once the momentum picks up, the government can take action to consolidate its expenses. Several economies have done this in the past.
Cutting some of the Rs 1.84 lakh crore food subsidy bill can create the fiscal space, the Survey said.
It emphasized on raising capital expenditure (and reducing revenue expenditure) that leads to asset creation.
This means economic growth, which primarily is driven by consumer spending, has to now come from greater investments. The Survey emphasized on investment-led growth by focusing on reviving the MSME sector.
To further make it easier to do business, it suggested removing the red tape at ports to promote exports as well as measures to make it easier to start a business, register property, pay taxes and enforcing contracts.
It also called for improving governance in public sector banks and the need for more disclosure of information to build trust. It also talks about dwarfism in the banking sector.
Printed in lavender colour - the same as the colour of the new 100 rupee currency note, the oldest currency note in circulation in the country, the theme of this year's economic survey is wealth creation.
Stating that only when wealth is created, it can be distributed, Subramanian said, "A feeling of suspicion and disrespect towards India's wealth creators is ill-advised."
In an attempt to boost demand, the Reserve Bank cut interest rate by 110 basis points in 2019 while the government speeded up the insolvency resolution process under Insolvency and Bankruptcy Code (IBC) and easing of credit, particularly for the stressed real estate and Non-Banking Financial Company (NBFCs) sectors.
"Impact of critical measures taken to boost investment, particularly under the National Infrastructure Pipeline, present green shoots for growth in the second half of 2019-20 and 2020-21," it said.
Listing global trade tensions and oil prices rising from an escalation in US-Iran standoff as downside risks to growth, it said GDP growth of India should strongly rebound in 2020-21 on a low statistical base of 5 per cent growth in 2019-20.
"On a net assessment of both the downside/upside risks, India's GDP is expected to grow in the range of 6.0 to 6.5 per cent in 2020-21," it said.
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