New Delhi, Feb 26 (PTI): Ahead of the Union Budget, the Economic Survey today termed external environment as challenging but projected a 7-7.5 per cent GDP growth rate in the next fiscal which could accelerate to eight per cent in a couple of years.

The Economic Survey for 2015-16, which was tabled in Parliament today, also made a case for carrying forward the reform process to achieve macro-economic stability.

Inspite of challenges and lower than projected GDP growth rate during 2015-16, "the fiscal deficit target of 3.9 per cent of GDP seems achievable."

After a 7.2 per cent economic growth in 2014-15, it said the expansion in economy will be 7.6 per cent in the current fiscal, the fastest in the world.

However, it cautioned that if the world economy remained weak, India's growth will face considerable headwinds.

On the domestic side, two factors can boost consumption, increased spending from higher wages and allowances of government workers if the 7th Pay Commission is implemented and return of normal monsoon.

At the same time, the Survey enumerated three downside risks - turmoil in global economy could worsen the outlook of exports, contrary to expectations oil price rise would increase the drag from consumption and the most serious risk is the combination of these two factors.

"One of the most critical short-term challenges confronting the Indian economy is the twin balance sheet problem - the impaired financial positions of the public sector banks and some corporate houses. The twin balance sheet challenge is the major impediment to private investment and a full-fledged economic recovery," the Survey said.