Budget 2015: Economic Survey clears path for big ticket reforms, Govt likely to remain cautious

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The worst is clearly over and the economy has begun its trudge down the road to achhe din’. The Economic Survey, tabled in the Parliament today by Finance Minister Arun Jaitley, observed that India’s economy is slated to grow by over 8%, even as the consumer price index remains between 5-5.5% in FY16.

The Economic Survey, which calculated the GDP projection under a new system with the base year as 2011-12, also suggests that India will become one of the world’s fastest growing economies. The survey that is considered to be a report card of the economy, prepared by the chief economic advisor to the Finance Ministry, Arvind Subramanian, said that a faster GDP growth rate will clear the path for bolder reformatory measures to be announced by the government in the next few years.

"India has reached a sweet spot - rare in the history of nations - in which it could be launched on a double-digit medium-term growth trajectory, which would allow the country to attain the fundamental objectives of ‘wiping every tear from every eye’," the Economic Survey observed, adding that "there is a scope for big bang reforms now." The survey predicts that India will grow between 8.1-8.5 per cent in FY16.

The other important observation in the Economic Survey suggested that the fiscal deficit will remain within the 4.1% range, similar to the line towed by Prime Minister Narendra Modi. Economists and industry experts are largely confident that while Finance Minister Jaitley will be cautious in his approach in the budget tomorrow, he will be able to adhere to the deficit target primarily because of lower oil subsidy.

However, while the survey said the current account deficit for the year will fall to 1% of the GDP, adding further impetus to government’s reform measures, it also observed that the government had over-estimated its tax estimates. The survey said that the government would need to increase revenue generation, possibly hinting towards a lack of any tax sops in the Union Budget tomorrow.

Importantly, just a day after the rail budget was announced, betting high on Modi’s ‘Make in India’ initiative, the Economic Survey said that ‘investments in railways will transform the Indian manufacturing industry with Make in India’ becoming a reality.

The survey observed that while public sector investments will provide the Railways a short-term growth impetus, it will actually be private investments that will transform India’s largest employment generator.