Country sees growth holding up, inflation falling - TV cites govt report

India's government expects growth to hold up and inflation to decline next year, TV channels reported on Friday, ahead of a pre-budget Economic Survey that will set the scene for Finance Minister Arun Jaitley's budget on Monday.

The survey, to be published shortly, is expected to forecast that Asia's third-largest economy would grow by between 7.0 percent and 7.5 percent in the fiscal year starting on April 1, according to sources cited by ET Now and Bloomberg TV.

Inflation was expected to decline to 4.5 percent to 5.0 percent in the 2016/17 fiscal year, within the Reserve Bank of India's target, while the current account deficit would remain low at 1.0 percent to 1.5 percent of gross domestic product, they said.

Jaitley faces a tough choice on whether to raise fiscal deficit targets to pay for ambitious investments and big public sector pay hikes in his third budget.

Although Asia's third-largest economy has overtaken China's as the world's fastest growing, weak business investment and a growing bad loan problem at state banks will compel Prime Minister Narendra Modi to keep the spending taps open to deliver on his promise of jobs for India's 1.3 billion people.

The report's author, economic adviser Arvind Subramanian, has argued in favour of increasing the deficit, only to be rebutted by central bank governor Raghuram Rajan who argues that India should keep its power dry in case the weakening world economy tips into a recession.