NEW DELHI, Feb 26 - Pegging growth at 7-7.75 per cent for next fiscal, the pre-budget Economic Survey today asked the Centre to press ahead with reforms, cut subsidies and introduce GST, while advocating a review of mid-term fiscal targets to create space for additional expenditure.
It called India �a haven of stability� in a gloomy global landscape, but warned of possible currency turmoil after China�s recent devaluation.
Tabled in Parliament three days before Finance Minister Arun Jaitley presents his third Budget on Monday, the Survey projected growth rate of 7-7.75 per cent for 2016-17 with downside risks due to weak global economic scenario.
It put 2015-16 GDP growth at 7.6 per cent, below its earlier expectations of 8.1-8.5 per cent expansion, adding that India will take a �couple of years� to achieve the potential 8-10 per cent rate.
�With focus on reforms in key sectors, coupled with stable macroeconomic conditions, the growth prospect for the economy in the next year appears reasonable,� the Survey said, adding that the headwinds may come from sluggish global demand.
As the government faces Rs 1.02 lakh crore bill in pay hike for Central staffers and another Rs 1.8 lakh crore towards bank capitalisation, it favoured a review of fiscal deficit targets.
Saying the budget deficit target of 3.9 per cent of GDP in current year will be adhered to, the next fiscal will be �challenging� given the additional resources needed.
It said that �credibility and optimality� argued in favour of sticking to deficit target of 3.5 per cent of GDP for 2016-17, indicating some room for an upward revision.
�There are very good arguments for a strategy of aggressive fiscal consolidation and equally good arguments for a strategy of moderate consolidation that can place the debt on a sustainable path while avoiding imparting a major negative demand shock to a still-fragile recovery,� it said. �The Union Budget will carefully assess these questions.�
One option may be to narrow the deficit by 0.2 or 0.3 percentage points of GDP each year over the next five years, which would take the gap to 3 per cent of GDP by March 2021. The target is to cut fiscal deficit to 3 per cent by 2017-18.
It estimated that over Rs 1 lakh crore worth subsidies go to the well-off and advocated that they should be cut for better fiscal welfare management. It also called for a phasing out of the tax exemption raj that benefited the richer private sector and a �reasonable� taxation for better-off individuals.
The Survey also asked the government not to raise tax exemption limit for individuals, while suggesting bringing in Property Tax and widen the tax base from 5.5 per cent of earning individuals to over 20 per cent. � PTI