Stung by the low 4.4 per cent growth projection for this fiscal, the pre-Budget Economic Survey on Thursday endorsed Kelkar Panel recommendations on tax reforms besides a cut in subsidies and interest rates to deal with mounting and worrying fiscal deficit.

Setting the reform agenda for the Budget, the 2002-03 Survey, tabled in Parliament, singled out deteriorating fiscal situation as a "major challenge" and listed labour reforms, divestment, overhauling of regulatory regime including agriculture, and removal of infrastructural bottlenecks as other priority areas to achieve robust 8 per cent growth.

Mooting a two-pronged strategy of augmenting revenues and restraining expenditure for fiscal consolidation, it said

modernisation of tax administration, broadening the base and restricting the exemptions are needed to improve revenue collections, essential for fiscal consolidation.

Admitting that drought would pull down overall growth rate to 4.4 per cent this fiscal as against 5.6 per cent in

2001-02, the Survey said revenues from recovery of user charges have to be tapped besides phasing out tax exemptions and plugging evasions.

The survey gives no growth projections for the next financial year but said growth recovery was already visible.

However, without fiscal consolidation there was a risk that the pre-emption of resources by the government will crowd out the nascent recovery in private investment.

PTI