India's economic growth will gather speed over the next two years but radical policy changes including foreign investment in multi-brand retail and availability of agricultural land for industry are needed, the government's pre-budget economic survey said on Thursday.
The survey, tabled in Parliament on Thursday, pegged India's annual economic growth to be about 7.6 % in 2012-13 and 8.6 % in the year after.
The survey obliquely hinted political compulsions have forced a delay in reforms in key areas. "There were also pressures of democratic politics, which slowed reforms," it said.
Surging protests of policy paralysis, criticism for a series of scandals and concerns in international circles of macro-economic mismanagement, failed to galvanise the government into action.
Political compulsions coerced the government to quickly bottle up the flurry of reformist intent including allowing foreign direct investment (FDI) in multi-brand retail, aviation and pensions.
"By any cross-country comparison, India remains among the (economic growth) front-runners," said the survey, the government's own commentary on the state of the economy traditionally presented a day before the annual budget.
Finance minister Pranab Mukherjee said the survey provides vital inputs for Budget preparation and can also be critical of government policies.
"It (survey) charts economic development and challenges faced during the fiscal year. I view this economic survey as a vehicle for 14 new ideas and alternative policy options," Mukherjee told reporters.
A question mark loomed over the India's ability to meet this year's fiscal deficit target due to revenue slippages induced by a crippling industrial slowdown. Fuel Subsidy | Ports | Agriculture | Aviation
Government borrowing this year is set to touch a record Rs. 512,000 crore and at least 25% higher than budget estimates. This will push up interest rates as banks will have lesser funds to lend to corporations as also widen the fiscal deficit from the budgeted 4.6% of GDP.
"While an expanded deficit can boost consumption and economic growth, this is medicine akin to antibiotics. It is very effective if properly used and in limited doses, but can cause harm if used over a prolonged period," the survey said.
"Going forward, fiscal consolidation would need to be anchored in a framework that addresses some of the risks like rise in crude prices," it said.