Economic Survey 2014: Three-pronged strategy to push GDP to 7-8%

NEW DELHI: The government today suggested a three-pronged strategy of containing inflation, pushing tax and expenditure reforms and legal and regulatory frameworks for market economy for achieving 7-8 per cent in coming years.

"Reviving investment, essential for growth of jobs and income, requires a three-pronged approach" to improve India's long term growth prospects, said the Economic Survey, tabled by Finance Minister Arun Jaitley in Parliament on Wednesday.

As a first step the government should work towards achieving low inflation by putting in place a framework for monetary policy, fiscal consolidation and food market reforms, it said.

Secondly, the Survey underlined the need for tax and expenditure reform, including implementation of Goods and Service Tax (GST) to ensure a more predictable tax regime and thus place public finances on a sustainable path.

Expenditure reforms should also focus on public goods and new designs for subsidy programme.

India also requires legal and regulatory frameworks for a market economy. "This requires repealing the old legacy laws and creating state capacity to address market failures".

It further suggested that regaining growth momentum requires restoration of domestic macroeconomic balance and enhancing efficiency.

"The emphasis of policy would have to remain on fiscal consolidation and removal of structural constraints. Though some measures have been initiated to this end, reversion to a growth rate of around 7-8 per cent can only occur beyond the ongoing and the next fiscal," it added.

For the current fiscal, it said the growth will improve to 5.4-5.9 per cent, after remaining at sub-5 per cent level for past two years.