New Delhi: Outlining the roadmap to achieve 7-8 per cent economic growth on sustained basis, the Economic Survey today (Jul 7, 2004) indicated major initiatives in the Union Budget to overhaul tax system, slash deficit, contain prices and boost agriculture and industry.

Sounding alarm bells on the mounting fiscal deficits of both the Centre and States at 10 per cent of GDP (Gross Domestic Product), the Survey (2003-04), tabled in Parliament a day before presentation of Union Budget, said there is a clear need to overhaul the regime of tax exemptions, reduce the number of notifications, simplify procedures and move towards a paper-less and transparent administration anchored on trust.

Apart from fiscal consolidation and sustaining growth momentum, it listed other major challenges as boosting farm growth, expanding industry by 10 per cent and keeping inflation rate to about five per cent.

Warning that hardening global prices of oil and non-oil commodities could affect monetary conditions, it warned with fiscal deficit and signs of credit pick-up the possibility of interest rates moving northwards could not be ruled out.

To achieve higher 10 per cent industrial growth, the Survey said five constraints that needed to be tackled are: reservation for small-scale industries, high customs tariff, rigidity in labour laws, reaping economies of scale, friction in creation and closure of firms and distortions in indirect tax structure.

The burgeoning foreign exchange reserves at $ 120 billion have provided flexibility to hasten trade reforms, it said stressing on liberalising FDI (Foreign Direct Investment) regime to make it an engine of growth as in China.