Feb 27, 5:39 AM EST

Government report says India's economy to grow over 8 percent, poised for "big bang" reforms

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NEW DELHI (AP) -- A government report says India's economy will grow more than 8 percent in the upcoming financial year and appears to have shaken off its persistent problems of high inflation, rising budget deficits and poor domestic demand.

The Economic Survey, an annual report on the state of Asia's third-largest economy, said Friday that India appeared to have hit an economic "sweet spot" and was ready for "big bang reforms."

"A clear mandate for reform and a benign external environment now is expected to propel India on a double-digit trajectory," it said. The country, with about 1.25 billion people, needs high growth rates to create sufficient jobs for its burgeoning youth population.

India's Prime Minister Narendra Modi won national elections in May by a staggering majority on the back of a promise to revive the country's sputtering economy and create more jobs. But his government's interim budget in July was a damp squib.

Since then, Modi has brought in new economic advisers and there are big expectations for his government's first full-fledged budget, which will be announced on Saturday.

The Economic Survey forecast economic growth of between 8.1 percent and 8.5 percent for the financial year that starts April 1, which would make India the world's fastest growing economy, surpassing China.

However, the higher growth projections follow a revision of the baseline against which India calculated economic growth.

According to the new calculations India's economy is likely to grow 7.4 percent in the current financial year ending in March.

India's annual growth averaged about 8 percent in the decade up to 2010 but slumped to about 5 percent in the following years.

The survey said the Indian economy would enjoy the benefits of economic reforms, lower global oil prices, low inflation and a normal monsoon next year. Inflation is expected to stay in a 5-5.5 percent range.

It also forecast the government to stay within its fiscal deficit target of 4.1 percent of GDP in the current year and lower that to 3 percent in the medium-term.

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