8% GDP growth a must for $5-tn economy: Economic Survey

India's economy should grow at 7% in the financial year 2019-20, but the country needs a sustained 8% growth rate per annum to become a $5 trillion economy by 2024, the Economic Survey for 2018-19 tabled in parliament by Finance Minister Nirmala Sitharaman said on Thursday.

It made the case for investment-driven “virtuous cycle” to sustain a GDP growth rate at 8% and said investment would be the "key driver" of simultaneous growth in demand, jobs, exports and productivity.

The survey, authored by Chief Economic Advisor K V Subramanian, said in an unpredictable world, policy-making needs a clear vision for a $5 trillion economy and warned against poor enforcement of contracts and dispute resolution, which he said could pose the biggest hurdle in India's economic acceleration.

“One of the biggest hurdles to #Economy5trillion is poor enforcement of contracts and dispute resolution. Steps to speed up the legal process should be the top priority. #EcoSurvey2019 shows that required efficiency gains and appointments are large but achievable,” Subramanian said.

The survey said while lower crude oil prices were expected to boost consumption, increased uncertainty over US-China trade tensions might hit exports, going forward.

The economic survey, a flagship document of the finance ministry that reviews the performance of the economy in the past 12 months, outlines challenges and recommends measures to overcome those, has set the tone for Sitharaman's first Budget on Friday.

The survey praised the government for its fiscal consolidation measures in the year gone by and projected the consolidated fiscal deficit of the Centre and states at 5.8% in 2018-19 as against 6.4% in 2017-18.

It said the drag in the Indian economy in the January-March quarter of 2018-19 was due to election-related uncertainties and the stress seen in non-banking finance companies (NBFCs).

Subramanian's economic growth projections are in line with that of Reserve Bank of India (RBI) latest estimates in June, where it cut India's growth rate to 7% in FY20 from an earlier 7.2%.

In a prescription to RBI, the survey suggested it should keep the interest rates lower to give a boost to savings.

“Our analysis shows that savings are driven primarily by demographics and income growth. Therefore, keeping domestic interest rates high may not encourage savings behaviour; a mildly positive real rate is good enough.

Urging the government to give a renewed focus on small businesses, it said “Indian MSMEs need to be freed from shackles that convert them into dwarfs. MSMEs need to be seen as a source of innovation, growth and job creation”.

It projected the growth rate in agriculture at 2.9% for 2018-19 and said an integrated agriculture market was needed for the sector's growth.

“India does not yet have such a nationally integrated agriculture market, which should have happened if the marginal benefit of data today is indeed higher than the cost. Why has the corporate sector’s data wave not found a parallel in the agriculture sector,” it said?