Workers at a cotton processing and packaging factory in Kadi
New Delhi - AFP
India's economy is in a "sweet spot" and ready to grow by more than eight percent in the next financial year, an official report said Friday on the eve of the new right-wing government's first full-year budget.
The India Economic Survey, an annual report prepared by the finance ministry, said growth would be between 8.1 and 8.5 percent in the 2015-16 financial year, reaching levels last seen five years earlier.
The ministry said the data showed the timing was right for the reforms to India's economy promised by Prime Minister Narendra Modi and to meet his ambitious targets to eradicate poverty.
"India has reached a sweet spot... in which it could finally be launched on a double-digit medium-term growth trajectory," the Economic Survey said, adding there was now scope for "Big Bang reforms".
The upbeat forecast came weeks after the government put growth for the current financial year at 7.4 percent, outpacing China and making India the world's fastest-growing economy, after changing the way it calculates its Gross Domestic Product (GDP).
The figures surprised many economists as India had been thought to be in its worst economic slowdown since the 1980s.
The survey also forecast India's consumer inflation would moderate to between five and 5.5 percent in 2015/16, raising hopes for more easing in monetary policies.
The central bank has been under pressure from the government and businesses to unwind high interest rates to boost business borrowing and accelerate growth.
But the central bank has maintained it would further cut rates only after "high-quality fiscal consolidation" and continued lower inflation after it reduced rates unexpectedly last month.
India's once high prices have been steadily cooling, partly thanks to dipping global crude prices which have lowered the cost of fuel subsidies and allowed India, an oil importer, to hike excise duties.
But analysts were still sceptical, saying it was too early to celebrate the positive outlook in the report.
"The economic survey is making all the right noises... but there has always been a gap between the survey and the actual policy that will be set out Saturday and in months to come," said Ashutosh Datar, an economist at the Mumbai-based IIFL Institutional Equities brokerage.
"So let's pop the champagne when actions match the expectations in the survey. Until then let's leave the bottle in the chiller."
-- Poverty targets --
Modi's landslide election victory last May was largely based on pledges to reform and revive the ailing economy and attract much-needed foreign investment.
The current path of growth would help the government meet the needs of the India's growing middle class and a quarter of its 1.2 billion population who live in poverty.
"This trajectory would allow the country to attain the fundamental objectives of 'wiping every tear from every eye' of the still poor and vulnerable," the report said.
The government added it would not overshoot its fiscal deficit target of 4.1 percent of GDP in the current fiscal year ending March 31 and that it would cut it to three percent by the end of the next financial year.
The ministry said it would be able to achieve such targets by shifting spending from huge subsidies to increasing investments to restore the health of India's public finances.
Investors were left underwhelmed by an interim budget introduced shortly after Modi came to power, and are looking for concrete details from Saturday's budget, including on plans to boost India's manufacturing and improve shoddy infrastructure.
Modi has promised to slash red tape, reform tax and overhaul land acquisition laws to try to attract foreign investment and create jobs for millions of young people.