Highlights: Government unveils economic survey ahead of budget

NEW DELHI (Reuters) - The finance ministry delivered a report on the state of the economy on Wednesday, a day before Finance Minister P. Chidambaram unveils what is expected to be the most austere federal budget in years.

The annual report was prepared by Raghuram Rajan, the former chief economist to the International Monetary Fund (IMF) who became the top adviser in the finance ministry last year.

Following are highlights of the report:

GROWTH

* GDP growth seen around 5 percent in 2012/13

* GDP growth seen at 6.1-6.7 percent in 2013/14

FISCAL DEFICIT

* India likely to meet fiscal deficit target of 5.3 percent of GDP in 2012/13, despite "significant" shortfall in revenues

* Government target for fiscal deficit is 4.8 percent of GDP in 2013/14

* Government target for fiscal deficit is 3 percent of GDP in 2016/17

* Widening tax base and prioritising expenditure seen as key ingredients of credible medium-term fiscal consolidation plan

* Raising tax to GDP ratio to more than 11 percent seen as critical for sustaining fiscal consolidation

* Room for accommodative monetary policy with expected fiscal consolidation

INFLATION

* Headline inflation may ease to 6.2-6.6 percent in March

CURRENT ACCOUNT DEFICIT

* Focus on curbing imports, making oil prices more market determined to rein in current account deficit

* Recommends curbing gold imports to reign in current account deficit

* Room to increase exports in the short run limited

FOREIGN INFLOWS

* Foreign Institutional Investors (FIIs) flows need to be targeted towards long-term rupee instruments

SECTOR GROWTH

* Industrial output seen growing around 3 percent in 2012/13

REPORT COMMENTS

* "Going forward, credible budgetary plans for fiscal consolidation, along with augmented agricultural production should lead to lower inflation and give the RBI room to reduce policy rates."

* "A high fiscal deficit, falling investment, falling savings, a high current account deficit, and high consumer price inflation all suggest the urgent need for macroeconomic stabilisation."

* "Controlling the expenditure on subsidies will be crucial. The domestic prices of petroleum products, particularly diesel and liquefied petroleum gas (LPG) need to be raised in line with the prices prevailing in the international markets."

(Compiled by Matthias Williams and Anurag Kotoky)