Disappointing performance of the economy in this fiscal should be a 'wake-up call' for the government, the Economic Survey said, but it expressed the hope that growth rate would rebound to 7.6 per cent in 2012-13 on the back of moderating inflation and low interest rates.
The Survey made a case for fiscal consolidation, tax reforms, opening of the multi-brand retail to global chains, freeing of diesel prices and stressed on honesty quotient too.
"The growth rate of real GDP (is expected) to pick up to 7.6 per cent (plus or minus 0.25 per cent) in 2012-13 and faster beyond that," the Economic Survey 2011-12 said.
It also pointed out that economic expansion in the current fiscal will moderate to a three-year low of 6.9 per cent.
Though the government's fiscal deficit is likely to significantly go off the target of 4.6 per cent of GDP this fiscal, the Survey expects it to narrow down to 4.1 per cent in 2012-13 on the back of pick-up in economic activities.
After tabling the pre-Budget document in Parliament, Finance Minister Pranab Mukherjee said: "It charts economic development and challenges faced during the fiscal year. It is a vital input for the preparation of the Budget."
India 'fourth largest economy'
The Survey, which projects India as the world's 4th largest economy, called for ruthless crackdown on corruption. Scandals are causing 'slowdown in decision making and holding up economic reforms', it said.
Referring to RBI's monetary policy, high inflation and slowing investment and industrial activity, the Survey said: "There is room and need to be innovative in terms of policy; the slowing of economy is a wake-up call in that respect'.
Talking to reporters, Chief Economic Adviser Kaushik Basu, the main author of the Survey, said growth in the manufacturing and agriculture sectors are likely to be key drivers in the next fiscal. "There could be one more year of a slight slowing down of investment and saving rates. We expect ... rates to pick up handsomely after that," he added.
Inflation
Inflation, on the other hand, is projected at 6.5-7 percent by the end of March.
"It may further moderate during 2012-13 due to tightening of monetary policy and other measures put in place by the government," the survey said.
Focus on honesty
Cautioning that market economy cannot function if people are totally self-serving, the Economic Survey called upon political leaders and policymakers to become role models of honesty and integrity.
"If the political leaders and policymakers act as role models in terms of ... qualities of honesty, integrity, and trustworthiness, that can set the ball rolling (for better governance)," said the Survey.
Regretting that non-economic facets of life did not get adequate attention, it said, 'we ...know that a market economy cannot function if people are totally self-serving'.
It further pointed out that while self-interest is a is a major driver of economic growth, 'it is important to recognize that honesty, integrity, and trustworthiness constitute the cement that binds society'.
"Honesty and integrity can be nurtured and aversion to corruption can be shored up," it added.
Must fight corruption
The pre-Budget Economic Survey also called for ruthless crackdown on corruption and said graft scandals are slowing down decision-making and holding up economic reforms.
"While we need to ruthlessly crack down on corruption, it must, at the same time, be recognised that the fear of a large and cumbersome anti-corruption bureaucracy can be detrimental to risk taking and may hamper legitimate activities in public institutions," said the report.
"One reason of increased awareness of high profile corruption scandals in different part of India and welcome civil- society activism has caused a sense of caution among civil servants in taking the final decision," the document said, adding "this would cause a slowdown in decision making".
The survey also blames coalition politics and federal considerations role in holding up economic reforms.
The government has to put on hold its decision to allow foreign direct investment (FDI) in multi-brand retail due to stiff opposition from its key UPA ally Trinamool Congress and other political parties.