NEW DELHI - The Indian economy can expand as much as 7.75 percent this fiscal, says the country’s Economic Survey for 2008-09, while calling for sweeping reforms in areas like foreign investment, divestment, taxation and the subsidy regime.

“If the US economy bottoms out by September 2009 there would be good possibility for the Indian economy repeating its 2008-09 performance,” said the country’s annual economic report card tabled in parliament by Finance Minister Pranab Mukherjee.

The economy can even expand up to 7.75 percent, as against last year’s 6.7 percent, if the monsoon rains were normal, it said, with the caveat that much also depended on the government’s capacity to push some critical policy reforms.

Compared to other emerging economies, India has several strengths that can help an early mitigation of the adverse effects of the global financial crisis and the recession in major economies, it said.

The $1.2-trillion Indian economy expanded by 6.7 percent last fiscal, after registering a 9 percent average growth in the preceding three years.

The survey, tabled annually ahead of the national budget and prepared by the chief economic advisor in the finance ministry, presents an overall view of the state of the economy and gives some suggestions on the future course of action.

The 2008-09 survey, which wants restoration of high growth with price stability, has also called for limiting subsidies such as those doled out on fertilisers and cooking gas, while asking for a review of exemptions granted to exporters.

It also wants the government to decontrol petrol and diesel prices, allowing the oil retailing companies to independently set the price of these two transport fuels, like they do for aviation fuel. Decontrol of sugar and fertiliser industries has also been strongly recommended.

The survey said the government must also take a thorough re-look at its divestment policy and target to realise 25,000 crore ($5 billion) per annum from the sale of at least 10-percent equity in government-owned enterprises.

Further, it advocated the auction of loss-making state-run enterprises.

The survey has rightly stressed need for revisiting agenda for pending reforms with a view to renew the growth momentum, said the Associated Chambers of Commerce and Industry (Assocham), reacting positively to the measures.

In the case of excise, customs and taxation, the survey called for a new income tax code, rationalisation of double taxation, phasing out of surcharges, and removal of fringe benefit tax and dividend tax.

In the area of external reforms, the survey wants the government to allow 49 percent foreign equity in defence production, 100 percent in high-technology defence equipment and permission for global firms in multi-brand retailing.

Foreign direct investment in multi-format retailing should start with food, it said, while suggesting that for five years, these companies must also have wholesale outlets for small and unorganised retailers.

The survey also appeared to have taken notice of the controversies surrounding the allocation of radio frequencies to telecom companies and suggested auction of spectrum and make it freely tradable among the operators.

Even for Indian Railways, the survey has some suggestions to offer. Private entry into provision of train services should be allowed to and from all tourist destinations, it said.

About a dozen tourist routes could be identified and a single licence issued to private companies to provide passenger services on any or all the routes, it suggested.

Another sweeping suggestion is to convert the government departments that provide commercial services into corporations to possibly help in the induction of private equity in future.

It also wants port trusts, minus their allocated land, to be listed as companies with 49 percent public holding.

In the area of social sector, the survey said innovative steps implementing programmes had brought some transparency, but much more needed to be done, with emphasis on better governance and delivery.