Survey for subsidy cut, wider tax base
The pre-Budget Economic Survey presented to Parliament on Wednesday by finance minister P. Chidambaram reflects the grim reality that India is facing a severe slowdown and must act fast to spur investment, restart stalled projects, cut interest rates and contain its fiscal deficit.
It made it clear that this fiscal’s five per cent growth, the slowest in the past decade, could no longer be blamed on external factors alone, and the government will have to act on the domestic front to come out of the slump.
The survey, while projecting an optimistic growth rate of 6.1-6.7 per cent for 2013-14, said that to contain the fiscal deficit the government should widen the tax base and cap subsidies, particularly through better targeting and plugging leakages. It also claimed the downturn was more or less over, and that the economy was looking up.
Chief economic adviser Raghuram Rajan, in his introduction to the survey, expressed optimism that India could come out from slow growth. “These are difficult times, but India has navigated such times before, and with good policies it will come through stronger,” he wrote.
Speaking to reporters later, he said a turnaround was “round the corner”, with growth of over six per cent likely in the next fiscal on the back of initiatives by the government to improve investor sentiments. “There is a glimmer of a turnaround. The conditions are in place... as we do not expect a global headwind like last year. But much of it we have to do domestically,” he said.
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