Fiscal Imbalance: The fiscal deficit as a proportion of GDP was 6.
1 % at 2008-09 (RE), compared with 2.7 per cent in 2007-08. The revenue deficit, a measure which reflects the excess of current expenditure over the current receipts, was estimated 4.5% of GDP in 2008-09, compared with 1.1% of GDP in 2007-08 (RE).
The primary deficit i.e. the fiscal deficit net of interest payments, which is an indicator of the current fiscal stance of the government, was 2.5 percent of GDP in 2008-09 compared with 0.
9 per cent in the previous year. The Centre has projected fiscal deficit to fall to 4.6 percent in 2011-12. The Prime Minister’s Economic Advisory Council (PMFAC) report said capital flows this fiscal (2011-12) were likely to rise to $72 billion from $61.9 billion in 2010-11. After 1991, the government has taken many steps towards fiscal consideration. These steps can be grouped into tax reforms and expenditure reforms.
Tax Reforms: (i) Lowering down lax rates to discourage tax evasions; (ii) Rationalisation of lax rates- – reducing tax slabs; (iii) Introduction of VAT in many states; (iv) Simplification of tax system; (v) Computerisation of tax system; (vi) Increasing share of direct taxes in total tax receipts. Expenditure Reforms: (i)Reduction in subsidies on fertilisers, sugar, kerosene, LPG, petrol, etc.; (ii) Right-sizing of government staff; (iii) Restructuring of loss making PSUs; (iv) Introduction of new pension scheme: (v) Introduction of VRS. It seems it will take some time to bring down fiscal deficit as per the FRBM Act due to recessionary trends prevailing.