28 February 2015

Key highlights of Economic Survey 2014-15

The survey prepared by the finance ministry's chief economic adviser Arvind Subramanian on the state of Indian economy was released ahead of Saturday's Union Budget announcement for 2015/16 fiscal year that begins on April 1.

Centre forecast GDP growth of over 8 per cent (y/y) in the 2015/16 fiscal year, a key economic report said.

Following are the highlights of the survey:

Fiscal Deficit
* India must meet its medium-term fiscal deficit target of 3 percent of GDP
* Government will adhere to fiscal deficit target of 4.1 percent of GDP in 2014/15
* Government should ensure expenditure control to reduce fiscal deficit
* Expenditure control and expenditure switching to investment key

Growth
* 2015/16 GDP growth seen at over 8 pct y/y
* Double digit economic growth trajectory now a possibility
* Economic growth at market prices seen between 8.1 - 8.5 percent in 2015/16 on new GDP calculation formula
* Total stalled projects seen at about 7 percent of GDP, mostly in private sector

Reforms
* There is scope for big bang reforms now
* India can increase public investments and still hit its borrowing targets

Inflation
* Inflation shows declining trend in 2014/15
* Inflation likely to be below central bank target by 0.5 - 1 percentage point
* Lower inflation opens up space for more monetary policy easing
* Government and central bank need to conclude monetary framework pact to consolidate gains in inflation control
* Consumer inflation in 2015/16 likely to range between 5-5.5 percent

Fiscal Consolidation
* Govt remains committed to fiscal consolidation
* India can balance short-term imperative of boosting public investment to revitalize growth with fiscal discipline
* Outlook for external financing is correspondingly favourable

Current Account Deficit
* Estimated at about 1.3 percent of GDP in 2014/15 and less than 1.0 percent of GDP in 2015/16

Subsidies
* Overhauling of subsidy regime would pave the way for expenditure rationalisation

Liquidity

* Liquidity conditions expected to remain comfortable in 2015/16