Economic Survey 2013 paints sombre picture of economy, lowers growth to 5%

Feb 27 2013, 17:12 IST
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Finance Ministry has delivered a report on the state of the economy, a day before Finance Minister P Chidambaram unveils Union Budget. Finance Ministry has delivered a report on the state of the economy, a day before Finance Minister P Chidambaram unveils Union Budget.
SummaryAnnual report is prepared by Raghuram Rajan, the former chief economist to IMF.

Painting a not-so-rosy picture of the economy, the pre-Budget Economic Survey today spoke of the "danger" of missing fiscal targets in the current year which may clock only 5 per cent growth against the projected 7.6 per cent and made a case for widening of tax base and cutting of subsidies.

Against the backdrop of speculation over proposals for taxing super-rich and on inheritance, the Survey cautioned against raising taxes.

The Survey, tabled by Finance Minister P Chidambaram in Parliament, projected an optimistic growth rate of 6.1-6.7 per cent for the 2013-14 claiming that the downturn is more or less over and economy is looking up.

The economic growth rate in the current financial year is expected to slip to decade's low of 5 per cent from 6.2 per cent in 2011-12 and 9.3 per cent a year before that.

The Survey last year had projected the growth rate for 2012-13 at 7.6 per cent.

"These are difficult times but India has navigated such times before and with good policies it will come through stronger," Chief Economic Advisor Raghuram G Rajan, the lead author of the Survey, told the media later.

In order to meet the challenges of the economy, he prescribed shifting national spending from consumption to investment, removing the bottlenecks to investment, growth and job creation, besides making efforts to reduce cost of funds.

On the issue of rising subsidy bill, the Survey said, "the danger that fiscal targets would be breached substantially become very real in the current year".

The government had pegged the fiscal deficit, an indicator of public finances, at 5.1 per cent for the Gross Domestic Product (GDP) for 2012-13. Chidambaram later revised it to 5.3 per cent in view of rising expenditure and subdued revenue collection.

The Minister had proposed to bring it down to 4.8 per cent for 2013-14. Some announcements in this regard could be made in the Budget to be unveiled in Lok Sabha tomorrow.

While cautioning against raising tax rates, Survey said that in order to augment revenue the government should make efforts to widening tax base and cutting subsidies, particularly on petroleum products, to reduce expenditure.

"It is much better to achieve a higher tax-GDP ratio by broadening the base which is taxed rather than increasing marginal tax rates significantly -- higher and higher tax

rates impinge more and more on incentives to undertake taxable activity, while encouraging tax evasion," it said.

The remarks assume significance in view of the

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