New Delhi, Jan 31 (PTI): India's economic growth is likely to dip to 6.5 per cent this fiscal after shock demonetisation shaved off a good 0.5 percentage points but it will rebound to 6.75-7.5 per cent in the next financial year, Economic Survey said today, calling for bold cut in tax rates.

The pre-Budget pointer called for cut not just in individual income tax rates and a timetable for reducing the corporate taxes but also for widening the net to progressively encompass "all high incomes".

Though the Survey did not indicate what it meant by all high incomes, the reference may be to agriculture income which is currently out of the tax net.

Invoking Mahatma Gandhi's vision of 'wiping every tear from every eye', it made a pitch for implementing Universal Basic Income (UBI) to entitle the poor with at least some income and thus eliminate poverty.

"Given the uncertainty (after demonetisation), we provide a range: a 0.25 percentage point to 1 percentage point reduction in nominal GDP growth relative to the baseline of 11.25 per cent; and a 0.25 percentage point to 0.5 percentage point reduction in real GDP growth relative to the baseline of estimate of about 7 per cent," it said.

Indian economy had grown by 7.6 per cent in 2015-16 and was projected to grow by 7.1 per cent in the current fiscal by the Central Statistical Organisation (CSO) that did not fully account for the disruption demonetisation had caused.

"Over the medium run, the implementation of the GST, follow-up to demonetisation, and enacting other structural reforms should take the economy towards its potential real GDP growth of 8 per cent to 10 per cent," said the Survey tabled in Parliament by Finance Minister Arun Jaitley ahead of Union Budget 2017-18 to be unveiled tomorrow.

For the 2017-18 fiscal, beginning on April 1, it put the real GDP growth at 6.75 per cent to 7.5 per cent rage. "Even under this forecast, India would remain the fastest growing major economy in the world."

The forecast however had downside risks in the extent to which the effects of demonetisation could linger into next financial year, especially if uncertainty remains on the policy response.

"Currency shortages also affect supplies of certain agricultural products, especially milk (where procurement has been low), sugar (where cane availability and drought in the southern states will restrict production), and potatoes and onions (where sowings have been low)," the Survey said, asking the government to be vigilant on prevent other agricultural products becoming what pulses was in 2015-16.

It also listed surge in global oil prices and possible eruption of trade tensions amongst the major countries as other risks.