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Tough measure needed to check states' deficit

The Economic Survey suggested drastic reforms and implementing of the Debt Swap Scheme to reduce states' fiscal deficits from the present 4.6 per cent of GDP.

india Updated: Feb 27, 2003 17:45 IST

Alarmed at worseningfinancial condition of states, the Economic Survey on Thursday stressed on drastic reforms and implementation of the Debt Swap Scheme to reduce their fiscal deficits from the present 4.6 per cent of GDP.

"The deterioration in state finances is more pronounced. Fiscal deficits of state governments increased from 3.3 per cent of GDP in 1990-91 to 4.6 per cent in 2001-02," the pre-Budget Survey tabled in Parliament said.

The revenue deficit of states nearly trebled from 0.9 per cent of GDP in 1990-91 to 2.6 per cent in 2001-02 although revenue from their own taxes increased marginally to 5.8 per cent of GDP last fiscal from 5.3 per cent in 1990-91.

The Survey noted that fiscal deficit is slated to come down to 4.2 per cent of GDP this fiscal with revenue deficit coming down to 2.0 per cent from 2.6 per cent in 2001-02 after implementation of reforms.

State level fiscal reforms have been initiated in Karnataka, Maharashtra, Punjab and Kerala through Fiscal Responsibility bills, it said.

After the Eleventh Finance Commission had suggested a monitorable fiscal reform programme for all states, the Survey said Centre had drawn up a State Fiscal Reforms Facility and an incentive fund of Rs 10,607 crore.

"So far, 18 states have drawn up medium term fiscal reform programme in consultation with central government. The reform covers areas such as fiscal consolidation, public enterprise reform and power sector reform," the Survey said.

First Published: Feb 27, 2003 17:45 IST