Friday, December 14, 2007

Fiscal discipline at the state level

A few days ago, I had posted a blog entry pointing to my paper New issues in Indian macro policy which is forthcoming in T. N. Ninan's edited book. In that paper, I suggest that the glass is half full on fiscal consolidation. India has made important institutional changes (e.g. tied down fiscal policy with the FRBM Act) and administrative changes (e.g. the Tax Information Network) which have given significant progress on public finance. In connection with that, I noticed an RBI document which looks at state budget data for 2007-08. The press release summarises the important achievement: "The consolidated fiscal position of State Governments in 2007-08 indicates that the States have budgeted to achieve revenue surplus (0.3 per cent of GDP) during 2007-08 after a gap of two decades. As a consequence of the budgeted revenue surplus, the GFD is budgeted to decline to 2.3 per cent of GDP in 2007-08."

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