The government can increase public investment to drive growth without borrowing more, the Economic Survey 2014-15 said on Friday, in an indication that Finance Minister Arun Jaitley will stick to debt targets in his maiden full-year Budget, which is scheduled to be presented on Saturday.
The Economic Survey, the basis for Jaitley's Budget for the 2015-16 financial year starting April 1, forecast the economy would grow by 8.1-8.5 per cent under a new calculation method that makes the domestic economy the fastest growing in the world. It said a return to the heady days of double-digit economic growth was expected.
"India has reached a sweet spot and that there is a scope for Big Bang reforms now," the report said, adding that a clear mandate for reform and a benign external environment was expected to propel the country on a double-digit growth trajectory.
"The forecasts mark an acceleration from growth of 7.4 per cent in the 2014-15 financial year, giving Prime Minister Narendra Modi a chance to commit more funds to investment without resorting to deficit financing.
Modi came to power after a landslide election victory in May, 2014, but his government's first interim Budget was widely regarded as a flop and the Prime Minister, who has hired a new team of economic advisers, now wants to relaunch his growth and investment agenda.
The country can balance the short-term imperative of boosting public investment to revitalise growth with fiscal discipline, the report authored by economist Arvind Subramanian said.
The Economic Survey reiterated that the government would not overshoot its deficit target of 4.1 per cent of gross domestic product in the FY15 ending March 31, and stood by a medium-term target of cutting it to 3 per cent of GDP.
Inflation is on a declining trend, the report also said, while overhauling of state subsidies would pave the way to rationalise expenditure.