Template-type: ReDIF-Paper 1.0
Author-Name: Atul Sarma
Author-Email: sarmaatul@hotmail.com
Author-Homepage: 
Author-Name: Manish Gupta
Author-Email:ecomkgx@langate.gsu.edu
Author-Workplace-Name:Andrew Young School of Policy Studies, Georgia State        University
Author-Workplace-Homepage: http://isp-aysps.gsu.edu/
Title: A Decade of Fiscal Reforms in India
Abstract:The year 1991-92 was one of the toughest years for the Indian economy. All 
 the macroeconomic indicators became adverse. The overall economic growth slumped to 
 a mere 1.1%. The gross fiscal deficit stood at 8 % of the GDP and the revenue deficit 
 on the current account at 3.5 % in 1990-91. Prices shot up to 17 percent, an all time 
 high level. In the external sector, the balance of payment with as little as $1.1 billion
 foreign reserves or barely enough to meet two weeks’ import bill became precarious.  
 The shortage of foreign exchanges apart from inducing import squeeze for industrial 
 production led the country by June 1991 to face a hard option of defaulting on 
 international commitments such as debt servicing or accepting IMF structural adjustment
 and stabilisation programme. 
 The new government decided to adopt in June 1991 a programme of macro-economic 
 stabilization to restore viability to fiscal balances and the balance of payments and 
 to contain prices. At the same time it undertook a far reaching programme of structural 
 reforms involving bold initiatives in external trade, exchange rate, industrial policy 
 and so on, all aiming at moving the country to a higher growth trajectory through infusing 
 efficiency and international competitiveness. It also aimed at integrating the Indian 
 economy with the global system and enhancing its robustness through wider access to 
 better technology and benchmarking with the global performers. The reform process was
 comprehensive. The initial reforms focused on fiscal reforms, policy paradigm shift 
 from physical control regime to the one relying more on market forces and trade related
 reforms. Subsequently reforms were extended to cover financial sector and to put in 
 place law and regulatory framework compatible with a market system. 
 The full impact of the reform measures edges into view over a long span of time. 
 Nevertheless, a decade since the introduction of the reform process is a long enough 
 period to make visible the results of the reform measures. It is in this background that
 this paper addresses itself to a vital area of reforms, viz. fiscal reforms. It attempts
 to evaluate the impact of fiscal reforms on the public finances of the Union and state 
 governments. The paper starts with the outcome of the reform process as reflected in 
 different measures of balances and then proceeds to examine the performance of the process 
 variables that determine the aggregate balances. To form a view of the effectiveness of 
 fiscal reforms, we have examined the performance of some of the important fiscal variables 
 in an inter-temporal context. To be more specific, we have compared the performance of the 
 fiscal variables in the post reform decade with that of the preceding decade. 
Keywords: fiscal reform, India
Length: 37 pages
Creation-Date: 2002-04-01
File-URL: http://icepp.gsu.edu/files/2015/03/ispwp0204.pdf
File-Format: Application/PDF
Handle: RePEc:ays:ispwps:paper0204