Survey calls for more FDI, wants changes in sops, taxes etc

In the run-up to Union Budget 2009, the government on Thursday came out with its economic survey outlining measures that could be undertaken to put the country back on the high-growth track. The survey focuses on private participation in a whole host of sectors, and talks about passage of pension, regulatory bill, raising insurance foreign direct investment (FDI) to 49%, allowing 100% FDI in health and multi-brand retail is being hailed by many as a throwback to the mega reforms that the PV Narsimha Rao government undertook in 1991-92.

Radically different

An economic survey starkly different from what has been presented in recent years, it calls for massive reforms to drive growth and puts out various prescriptions .

Reactions to the survey ranged from mostly surprise to disbelief - some experts doubted the government's ability to walk the talk when it comes to delivering the goods in the actual budget, saying it was too good to be true.

Survey statements

The survey goes on highlight the need for a lot of fiscal reforms and also targets a zero fiscal deficit on a cyclically adjusted basis.

The survey also talks about limiting various fuel subsidies and raises the pitch for divestment. The survey set a target of Rs 25,000 crore per year for disinvestment. The key points: offloading at least 10% equity by listing unlisted PSUs and auctioning off loss-making ones.

Several tax reforms are recommended too: introduction of the income tax code, rationalizing dividend distribution tax, to stay away from double taxation, phasing out tax surcharges, cesses and transaction taxes, removal of the commodities transaction tax (CTT), fringe benefit tax (FBT) and the securities transaction tax (STT).

State of the economy

The economy seems to have recovered from the bottom-point during the global financial meltdown, the survey states, and promises an early revival. The social, physical, infrastructure and agriculture sectors find special mention as ones that require a major boost, it said.

Monetary policy

The survey touches upon the recommended course for monetary policy action and says the excess liquidity in the system put in to boost growth will need to be rolled back once the economy gets back on track.

It says that the credit market rigidity prevents interest rate moderation and calls for calibrated monetary policy measures to stoke growth and adds that financial stability must be on the government agenda. It advises strengthening of Indian banks, something that has already been happening and calls for proactive liquidity management and further financial sector reforms.

- With inputs from CNBC-TV18's Siddharth Zarabi

Read: The survey's key highlights on page 2