Economic Survey : India Economy to Grow 8.5%

India’s economy will grow at a rate of more than 8 per cent in the 2015-16 fiscal year, while consumer inflation will drop to between 5 and 5.5 per cent, according to the Economic Survey report, tabled at Parliament by Finance Minister Arun Jaitley, a day before Prime Minister Narendra Modi government’s first full Union Budget.

The survey, a report on the state of Indian economy, forecast the economy would grow by 8.1-8.5 per cent under a new calculation method that makes India the world’s top-growing big economy. The report also indicated that India can increase public investments and still hit its borrowing targets, while saying the country needed to adhere to its medium-term fiscal deficit target of 3 percent of gross domestic product.

Noting India had hit an economic sweet spot, the report added the country had room for big bang reforms. This gives an indication that Finance Minister Arun Jaitley will stick to debt targets in his maiden full-year budget .

The Economic Survey prepared by the Finance Ministry’s chief economic adviser Arvind Subramanian on the state of Asia’s third-largest economy was released ahead of Union Budget announcement for 2015/16 that begins on April 1.

* 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

* Govt should ensure expenditure control to reduce fiscal deficit

* Expenditure control and expenditure switching to investment key

* 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

* There is scope for big bang reforms now

* India can increase public investments and still hit its borrowing targets

* 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

* Govt 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

* 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

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

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

* Liquidity conditions expected to remain comfortable in 2015/16