It will take at least two more years for ‘ achche din ’ (good days) to arrive. The Economic Survey has estimated that GDP growth in the current fiscal year will be below 6 per cent. Growth of 7-8 per cent will not be seen before 2016-17, it noted.

Expressing concern over the current fiscal situation, Finance Minister Arun Jaitley said: “It (the Economic Survey) only shows the gravity of the economic situation and that it requires correction. The fiscal deficit for 2013-14 is 4.5 per cent and requires a downward movement over the next two years.”

The survey, tabled in the Lok Sabha on Wednesday, called for a greater focus on fiscal consolidation, a low and stable inflation regime, restructuring of the subsidy regime and the revamping of welfare schemes. The Survey is prepared by economists in the Finance Ministry and normally indicates what one can expect in the Budget.

Revised growth The Survey estimates economic growth in the range of 5.4-5.9 per cent, thus ending the below-5 per cent growth situation of the previous two years. However, “growth in 2014-15 is expected to remain more on the lower side of the range” due to numerous reasons. These include expectations of a below-normal monsoon, higher inflation, the gradual efforts to restart the investment cycle, the benign growth outlook in some Asian economies, particularly China, and prolonged geo-political tensions in Iraq, Syria and the Ukraine.

The Survey listed institutional reforms to quicken implementation of large projects. It said that a stronger-than-expected recovery in major advanced economies would help the Indian economy clock a higher growth rate. But it felt that regaining the growth momentum requires restoration of the domestic macro-economic balance and enhancing efficiency.

“To this end, 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 said.

Fiscal consolidation Indicating that the fiscal situation was worse than it appears, the Survey advocated sharp financial corrections. “A new Fiscal Responsibility and Budget Management (FRBM) Act with teeth, better accounting practices and improved budgetary management is needed,” it said.

Improvements on both tax and expenditure are needed to obtain high-quality fiscal adjustment.

The tax regime must be simple, predictable and stable. This requires a single rate Goods and Services Tax (GST), a simple Direct Tax Code with fewer exemptions and transformation of the tax administration. Government expenditure reforms should include shifting subsidy programmes away from price distortions and a greater focus on outcomes.

Inflation The Survey pointed out that though headline inflation inched up to 6 per cent in May due to the increase in some food prices and global commodity prices (crude oil and oilseeds), it is expected to moderate by 2014-end.

On retail inflation, it referred to targets set by the Reserve Bank of India, which aims to bring the consumer price index to 8 per cent by January 2015 and 6 per cent by January 2016. It also mentioned that retail inflation, too, was showing signs of moderation.

As inflation eases, it is expected that the RBI would adopt a more accommodative stance and undertake monetary easing. “However, the most prominent risk to the inflation outlook is the possibility of a sub-normal monsoon in 2014-15 and the impact on crude prices on account of the crisis in Iraq,” it said.