Riding high on a good monsoon, the finance ministry is formulating strategy to sustain the agriculture growth, which may touch 10 per cent this fiscal and take the economy on a high growth path of 7-8 per cent.
"The basic challenge now is how to consolidate agriculture growth, which is likely to be in double digits this fiscal," Chief Economic Advisor, Ashok Lahiri, said.
The farm sector would act as a 'catalyst' to push up GDP growth, which is likely to be beyond 6.5 per cent by any fair assessment considering the fact that the economy grew by 5.7 per cent in first quarter even before monsoon set in, he said.
"Agriculture is going to provide the fillip to economic growth, as there is strong indications of robust growth in industrial and services sector," Lahiri said.
The economist said a double digit growth in agriculture is not at all surprising as India posted more than 10 per cent growth in farm sector in several occasions.
For instance, farm sector grew by 15.4 per cent in 1989-90, while it was 14.3 per cent in 1967-68. The country's agri sector grew by 12.9 per cent twice in 1975-76 and 1980-81.
Manufacturing too have logged double digit growth in many years including 10.7 per cent in 1963-64, 10.83 per cent in 1989-90 and 12.3 per cent in 1995-96.
Service sector has been growing by over 8.0 per cent in the last few years.
"I can not say when the burst would come," Lahiri said, but indicated that the time was ripe for moving on to an accelerated economic growth path.
To consolidate the farm sector, which witnessed a negative 3.1 per cent growth last fiscal, Lahiri said the strategy would be to encourage agri-processing industries, agri-marketing, rural development and infrastructure.
To bring in another green revolution, the agriculture advisory committee has suggested a slew of measures to streamline credit, infuse technology and step up capital investment in farm sector, he said.
"Apart from agriculture, we will see a lot of action in infrastructure," he said.
Analysing the six-month perspective, the chief economic advisor said: "Fiscal consolidation and infrastructure development would be the two thrust areas in the coming months."
Asked how the government proposes to keep fiscal deficit within targets when subsidy bill was mounting, he said "subsidies in Indian democracy is sensitive to electoral cycle. At the same time, it is the duty of democracy to ensure that it was successfully managed."
When pointed out that the petroleum subsidy was expected to go much beyond Rs 6,000 crore (Rs 60 billion) as provided in the Budget, he said: "We have not brushed anything under the carpet. We are very transparent. There is tension in this regard and that is the price of honesty and for ending an opaque system that was pursued earlier."
There were lot of hidden subsidies in petroleum products in the past but it is no longer so now. Hence, the bill on account of petroleum subsidy appears to be over-shooting, Lahiri said.
On expenditure control, Lahiri said: "We don't believe in one-size-fit-all approach to effect a 10 per cent across the board cut in expenditure in all the ministries."
"Different horses are for different course. Hence, one-size-fits-all approach was not appropriate," he said.
Lahiri did not agree that the economic reforms have slowed down saying "on the contrary, lot of reforms have taken place quietly with the passage of several bills, including Fiscal Responsibility and Budget Management Bill, repeal of UTI Act, Securitisation Act and Electricity Act."
Dismissing the notion that power sector reforms have not moved forward, he said "in power sector, there is always a time lag and the atmosphere was conducive for lot of private players to invest into the sector, particularly in the distribution sector."
He also said there was a substantial move in reforming the tax system after the Budget.
"The reforms are taking place silently in improving tax administration. There is a need to improve the tax-to-GDP ratio," he said.
With computerisation, which was moving rapidly, he said: "It might become possible for government to ensure that it collected the taxes that was due from taxpayers by plugging revenue leakages."
"Going by rough estimates, he said at least 6.0 crore (60 million) of the country's population is now eligible to pay taxes but so far government has been able to bring under the tax-net only 3.3 crore (33 million) assessees.