The Mid-Year Review on Monday lowered growth projections at 6 per cent-plus this fiscal but maintained India would continue to be one of the fastest growing economies of the world.

The mid-year review, tabled in both Houses of Parliament, said a less than abundant monsoon has pared expectations regarding farms sector growth, but confidence regarding the overall growth prospects of the economy has been strengthened by the resilience displayed by industry and services.

"Even at a relatively lower growth rate of 6 per cent plus for the current year, India will continue to be one of the fastest growing economies of the world," it said.

The Mid-Year Review, however, warned that the threat to price stability and structural reform of the petroleum sector from the unprecedented rise in global crude oil prices persisted but perhaps with reduced intensity.

Domestic industrial activity continues to remain buoyant and there are definite signs of a pick up investment, it said.

It said one of the major concerns that needed to be addressed for carrying forward fiscal consolidation is the reform of the present subsidy regime.

"The report on targeting subsidies to the truly poor and needy, a commitment under the Common Minimum Programme, is being finalised," it said.

Stressing the need to carry forward tax reforms, the Mid-Year Review said the commitment to lower customs duties to ASEAN (Association of South East Asian Nations) level remained and implementation of VAT (value added tax) from April 1, 2005 would remove several distortions in the existing indirect system.

Further measures, aimed at streamlining taxes and broaden the tax base, which are in the pipeline, need to be implemented, it said adding rationalisation of taxes on goods and services to usher in an integrated common market for the country is the CMP goal that must be realised in a short span with active participation of state governments.

"Moderation and stability in rates, providing right kind of incentives for investment in particular and more efficient market behaviours in general and expanding the tax base through expansion of services and removal of unsustainable and discretionary exemptions are the core areas for reform," it said.

A comprehensive review of laws and procedures that underpin tax policy and administration needs to be undertaken to operationalise sound tax principles and practices, it said.

Outlining the reform agenda, the mid-year review said there is need for focused attention on the twin issues of insufficient investment and inadequate infrastructure.

Reinforcing the encouraging trends observed in the first half of the current year and minimising the downside risks from 'high and volatile' petroleum and metal prices call for sustained efforts to further structural reforms and to continue with the already charted path of fiscal consolidation, it said.

Turning to inflation, it said a combination of judicious macro-economic management and careful calibration to minimise the adverse impact of rising petroleum product prices on overall inflation would continue to be a challenge.

"Too fast a move may destabilise expectations regarding inflation. Too slow a move may build up resistance to price adjustments, affect profitability of public sector oil companies and wreck their balance sheets," it said.

Several reforms were being undertaken in agriculture, fiscal infrastructure and taxation for enhancing growth and investment, the mid-year review said adding the cooperative credit system for agriculture was being thoroughly examined for identifying necessary areas of reform.

Efforts were on to create a common market for agriculture produce in the country, it said adding the encouraging growth in commodity future trading needs to be sustained and nurtured within a modern and sound regulatory architecture.

In infrastructure, significant steps had been taken for augmenting capacities at ports by involving private initiatives.

The establishment of a regulatory framework for pension sector in the country would create new avenues for mobilisation of long-term funds for investment in infrastructure.

Development of quality international airports at Mumbai, Delhi, Hyderabad and Bangalore has been initiated, the review said, adding that this together with liberalisation of bilateral entitlements of landing rights need to be expedited.

This was particularly important to maintain the momentum gained in the arrival of international tourists into the country and it was expected that selective progress would be made towards an open sky policy.