India predicts turnaround in economy next fiscal year with 6.1%-6.7% growth

NEW DELHI - The government has predicted a turnaround for the Indian economy with GDP growth expected to rise anywhere between 6.1 and 6.7 per cent in the next fiscal year.

The Economic Survey, traditionally presented in Parliament a day before the annual budget, optimistically suggested that "the downturn is more or less over and the economy is looking up''.

This came at a time when the economy slid to its lowest growth rate in a decade at an estimated 5 per cent this fiscal year.

"India situation is difficult. The slowdown is a wake-up call for increasing the pace of actions and reforms," said the survey which sets out pointers for the government which has the option of either taking up the suggestions or rejecting them.

The survey said core inflation would remain between 6.2 per cent and 6.6 per cent while pushing for a further hike in price of diesel to reduce the subsidy burden on the government.

It suggested widening the tax base, just a day before Finance Minister P Chidambaram presents the annual budget where he is expected to walk a tightrope between fiscal prudence and increase in social welfare expenditure.

The economic survey, prepared by the finance ministry's chief economic adviser Raghuram Rajan, the former chief economist to the International Monetary Fund, maintained that with good policies, the economy would again come through stronger.

Since September last year, Prime Minister Manmohan Singh, who is in the last year of his second term, has done everything from opening up India's retail and aviation sectors to actively trying to attract foreign investment to stimulate sluggish growth.

On the need to improve agriculture growth, the survey said allowing foreign supermarket chains into India would pave the way for flow of investment into new technology and marketing of farm produce in India.

"Fast agricultural growth remains vital for jobs, incomes and food security,'' the survey said.

The slowdown in the Indian economy is seen to be the result of a combination of factors from a global slowdown leading to a slump in exports and decreased domestic demand that have hit the manufacturing and services sectors, and made potential foreign investors wary.

Estimates are that manufacturing rose just 1.9 per cent down from 2.7 per cent last year. The agriculture sector also dipped to 1.8 per cent in 2012-13 from 3.6 per cent the previous fiscal year.