7.5% GDP growth may be difficult: Survey

New Delhi: Across-the-board deceleration in economic activity has made it difficult to get to the 7.5 per cent GDP growth as projected earlier for the current fiscal, Economic Survey said on Friday as it called for more interest rate cuts and use of all policy tools to revive momentum.

Flagging uncertain fiscal outlook for 2017-18, it listed a number of challenges facing the economy -- appreciation of the rupee, farm loan waivers, rising stress on balance sheets in power as well as telecom and transition issues arising from implementing the Goods and Services Tax (GST).

Tabled in Parliament, the Survey — which is the second part of the one brought out in January-end and carries the mid-year review, warned of fiscal slippages as "a series of deflationary impulses are weighing on an economy yet to gather its full momentum".

One among them is farm loan waiver, which could cut demand in the economy by up to 0.7 per cent of GDP.

Farm loan waivers, which total Rs 1.25 lakh crore for states that have already announced such measures, could reach Rs 2.7 lakh crore if all states were to implement it.

Such waivers would be deflationary and impact demand by up to Rs 1.14 lakh crore.

"There has been an across-the-board deceleration" in real economic activity since the first and second quarter of last year, said Chief Economic Adviser Arvind Subramanian, the author of the Survey.

"It is less likely than before that we will reach the upper end" of the 6.75 to 7.5 per cent growth forecast for the fiscal year to March 2018, he said a media briefing.

India's economy grew by 7.1 per cent in the 2016-17 fiscal. Growth slowed to 6.1 per cent in the March quarter, its lowest in more than two years.

The Survey said inflation is expected to remain below the Reserve Bank of India's medium-term target of 4 per cent.

Fiscal deficit will fall to 3.2 per cent of GDP in 2017-18 as compared to 3.5 per cent last fiscal.

Since February 2017, the rupee has appreciated by about 1.5 per cent.

There are early signs of tax base expanding post the implementation of GST, it said. Also, nominal GDP growth has accelerated post demonetisation.

Meanwhile, Industrial output entered the negative territory in June contracting by 0.1 per cent mainly due to decline in manufacturing and capital goods sectors.

Besides, segments like mining, power generation, infrastructure/construction goods and consumer durables recorded poor performance.