The Economic Survey tabled in parliament has predicted that the economy will grow at 6.1-6.7% in 2013-14.
Growth had fallen to a nine-year-long low of 5% in the current fiscal year, according to the Central Statistics Office.
Many experts, however, are skeptical of this new Economic Survey target being met and call it an optimistic estimate.
The bullish Survey has also predicted that inflation (Wholesale Price Index) may decline to 6.2-6.6% by March 2013. This will create more room for rate cuts for the Reserve Bank of India, the survey states.
The survey also says the government is likely to meet the 5.3% fiscal deficit target despite "significant" shortfall in revenues in 2012/13
The annual report on challenges facing the economy is in many ways also a wishlist of the Chief Economic Adviser Raghuram Rajan, earlier the former chief economist to the International Monetary Fund (IMF). It is quite another matter that the wishes of Chief Economic Adviser's have usually been swatted aside by Finance Minister in their budgets, more so ahead of elections.
In his report, Rajan said the best way to rein in current account deficit would be by curbing imports and making oil prices more market determined.
The survey pitched for hikes in the prices of diesel and LPG to cut subsidy burden.
It also called for a widening of the tax base and said expenditure must be prioritised to check fiscal deficit.
Prioritising expenditure and raising the tax-to-GDP ratio were key to medium-term fiscal consolidation, it stressed.
Finance Minister Chidambaram has vowed to bring the deficit down to 4.8% in the fiscal year that begins in April.
A deficit of 5.3% of GDP will remain the widest spending gap among the BRICS group of major emerging nations, which also includes Brazil, Russia, China and South Africa.
It makes credit expensive for the private sector and is the prime reason for threats by ratings agencies Standard & Poor's and Fitch to downgrade India's sovereign credit rating to 'junk' status.
* India's GDP growth seen at around 5% in 2012/13
* India's GDP growth seen at 6.1-6.7% in 2013/14
* India's headline inflation may ease to 6.2-6.6% in March
* India likely to meet fiscal deficit target of 5.3% of GDP in 2012/13, despite "significant" shortfall in revenues
* India government target for fiscal deficit is 4.8% of GDP in 2013/14
* India government target for fiscal deficit is 3% of GDP in 2016/17
* Widening tax base and prioritising expenditure seen as key ingredients of credible medium-term fiscal consolidation plan
* Raising tax to GDP ratio to more than 11 pct seen as critical for sustaining fiscal consolidation
* Room for accommodative monetary policy with expected fiscal consolidation
CURRENT ACCOUNT DEFICIT
* Focus on curbing imports, making oil prices more market determined to rein in current account deficit
* Recommends curbing gold imports to reign in current account deficit
* Room to increase exports in the short run limited
* Foreign Institutional Investors (FIIs) flows need to be targeted towards long-term rupee instruments
* India's industrial output seen growing around 3 pct in 2012/13
* "Controlling the expenditure on subsidies will be crucial. The domestic prices of petroleum products, particularly diesel and liquefied petroleum gas (LPG) need to be raised in line with the prices prevailing in the international markets."