Economic survey 2009-10: Recovery assured, but spending must be reformed

Finance minister Pranab Mukherjee today tabled a cautious but optimistic Economic Survey 2009-10 in Parliament, which predicted 7.2 per cent growth for the current fiscal and a full recovery to 9 per cent growth in 2011-12, but expressed concern about inflation.

The government should start fiscal consolidation beginning in April by reforming spending, eliminating its revenue deficit, and putting a cap on government debt, the survey said. It urged a calibrated exit from fiscal stimulus measures, which cushioned India's economy from the worst of the global downturn but pushed the fiscal deficit to a 16-year high of 6.8 per cent of GDP.

The report, presented ahead of Friday's Union Budget, forecast economic growth at 8.25 per cent-8.75 per cent in 2010-11, accelerating to over 9 per cent the year after, compared with projected growth of 7.2 per cent-7.5 per cent in the current year.

It also highlighted the possibility of the economy achieving a double-digit growth within the next four years, underscoring the view that the economy is on a firm footing.

But it added that strong growth along with supply-side inflationary pressures was pushing up inflation in India. High food prices, which rose over 17 per cent in January, could spill over into general inflation, the report said.

"Lasting fiscal consolidation could accrue with reforms in the design and delivery of planned schemes, outcome focus of expenditure and institutional reforms," the report said.