Economic Survey 2013 paints sombre picture of economy, lowers growth to 5%
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While cautioning against raising tax rates, Survey said that in order to augment revenue the government should make efforts to widening tax base and cutting subsidies, particularly on petroleum products, to reduce expenditure.
"It is much better to achieve a higher tax-GDP ratio by broadening the base which is taxed rather than increasing marginal tax rates significantly -- higher and higher tax
rates impinge more and more on incentives to undertake taxable activity, while encouraging tax evasion," it said.
The remarks assume significance in view of the suggestions from certain quarters including Prime Minister's Economic Advisory Council (PMEAC) to impose higher taxes on super rich.
According to the Survey, "controlling the expenditure on subsidies will be crucial. The domestic prices of petroleum products, particularly diesel and LPG need to be raised in line with their prices prevailing in the international market."
Referring to the price situation, the Survey said that elevated food inflation would continue to remain an area of concern with inflation rate gradually inching towards double digit in December 2012.
The headline inflation, it said, is expected to decline to 6.2 to 6.6 per cent by next month.
The other concerns highlighted by the Survey include widening Current Account Deficit (CAD) mainly on account of high gold imports, absence of clear signs of revival of economic activities and lack of assured supply of raw material to projects especially in the power sector.
It, however, expressed the hope that measures announced by the government in the recent months would help in restoring the fiscal health of the government and check widening CAD.
The government has recently partially deregulated diesel prices, allowed FDI in multi-brand retail and liberalised foreign investment norms for various sectors.
"With the global economy also likely to recover somewhat in 2013, these measures should help in improving the Indian economy's outlook for 2013-14," the Survey said.
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