FICCI's
latest Economic Outlook Survey puts across the GDP growth estimate for the year
2014-15 at 5.3%, with a minimum and a maximum range of 4.9% and 5.8%. This is a
tad lower than the 5.5% growth estimate put out by the economists in the
previous survey round and is mainly on account of bleak prospects for
performance of the agriculture sector due to sub-par monsoon forecast.
Respondents
however seem more optimistic regarding the performance of the industrial sector
this year. The median forecast for industrial growth for 2014-15 is pegged at
3.1% and for agricultural sector at 2.1%. Further, services sector growth is expected
at 7.0% this year and is only marginally higher than 6.8% growth recorded in
2013-14.
On
the inflation front, participating economists expect prices to remain beyond
the comfort zone. The El Nino effect is expected to fuel inflationary pressure
going ahead. Sharing their views on dealing with the price situation, the
economists pointed out that the announcements made in the recent past by the
government to tackle inflation are very much focused.
They
unanimously felt that the government has little choice but to strengthen supply
side infrastructure. There is an immediate need to ease the distortions in
supply of food articles – from farm to market. And the forthcoming Budget
provides a good opportunity to the government to further move ahead and work on
inflation management.
Participating
economists expect the fiscal deficit to GDP ratio for 2014-15 to breach the
target of 4.1% set in the interim budget. The median forecast for fiscal
deficit stands at 4.5%, with minimum and maximum range of 4.2% and 5.5%.
The
respondents indicated that they are looking forward to the forthcoming Union Budget
and the focus of the budget should be on pushing growth and investments. Some
of the other suggestions made by the economists included-
v
Clear roadmap for implementation of Goods and Services Tax (GST), which will give
a huge boost to the economy. Review of the Direct Tax Code (DTC) with a view to
widen the tax base and rationalizing exemptions. These big ticket reforms
should be taken up as soon as possible.
v Signal that the government is looking at
strict fiscal prudence. Chart out a path to contain subsidies and switch the
focus from non-plan to plan expenditure. Put across a roadmap for
disinvestment.
v
Positive indications for the manufacturing sector would be critical. It is
imperative to firm up the growth in manufacturing sector, which will also aid
employment generation.
v
Boost infrastructure spending. Fast track implementation of stuck projects.
v
Indicate way forward on labor reforms
Further, India has the lowest tax to GDP ratio
among its peers. The economists were asked for some suggestions to widen
India's tax net. They mentioned that steps should be taken to bring more people
within the ambit of formal employment and widening the tax base should be given
a priority. The respondents felt that segments currently outside the scope of
tax net despite being at much higher incomes should be brought under the
purview of taxation. The participating economists also said that greater
clarity on issues like GAAR and retrospective taxation must be provided in the
upcoming budget.
The
economists were also asked their opinion about setting up of a specialized
asset management company for acquiring/restructuring large scale non preforming
assets. In this regard, a majority of respondents was of the view that setting
up a specialized asset management company will be a good move as it will help
improve the financial health of the banks. Also, it will free the balance
sheets of banks providing them the room to lend for other projects.
