IDEAS home Printed from
   My bibliography  Save this paper

A Decade of Fiscal Reforms in India



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.

Suggested Citation

  • Atul Sarma & Manish Gupta, 2002. "A Decade of Fiscal Reforms in India," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0204, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  • Handle: RePEc:ays:ispwps:paper0204

    Download full text from publisher

    File URL:
    Download Restriction: no


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Chaitanya, K., 2004. "Indian Economy in the Next Five Years: Key Issues and Challenges, 2005-2009," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 4(4).

    More about this item


    fiscal reform; India;


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ays:ispwps:paper0204. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Paul Benson). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.