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Economic Survey
Centre lauds States for fiscal prudence
Our Bureau
New Delhi
,
July 7
THE Union Government has lauded the fiscal reform efforts initiated by States such as Karnataka, Kerala, Punjab, Tamil Nadu and Uttar Pradesh towards putting in place fiscal responsibility legislations at the State-level.
Hinting at the need for an elaborate fiscal reforms framework at the State-level, the Government, in its Economic Survey for 2003-04, has noted that with the worsening of the fiscal situation during the recent years, a number of States have taken up fiscal reforms at the right earnest.
"In recent years, the need for State-level fiscal reforms has been well recognised. The problem of fiscal consolidation cannot be addressed unless reforms encompass both the Centre and States," the Survey has said. The Centre has already put in place a Fiscal Responsibility and Budget Management Act, which received Presidential assent in August 2003, binding the administration to pursue a prudent fiscal policy framework.
According to the Survey, the deterioration in the finances of State Governments has been sharper than that of the Central Government. "All the major fiscal indicators reveal a worsening of the fiscal situation as compared with the position in 1990-91. Fiscal deficit of States as a proportion of GDP increased from 3.3 per cent in 1990-91 to 4.7 per cent in the revised estimates for 2002-03," the Survey has said.
The Survey has pinned the blame on growing burden of interest payments, pension liabilities and administrative expenditure for the deterioration of fiscal situation at the State level. Losses of State-owned public enterprises, inappropriate user charges and deceleration in Central transfers have compounded the problem, the Survey has noted.
It has said that based on the recommendations of the Eleventh Finance Commission, a monitorable fiscal reforms facility covering the years 2000-01 to 2004-05 had been drawn up by the Centre and an incentive fund of Rs 10,607 crore was earmarked to encourage States to implement fiscal reforms.
"So far, 23 States have drawn up medium term fiscal reforms programmes under the facility," the Survey has said.
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