New Delhi: RBI Governor Y V Reddy said on 26 May the country’s fiscal situation has improved, but the numbers do not reflect “several underlying fiscal pressures.”
Speaking at a programme organized by the National Institute of Public Finance and Policy, the Reserve Bank of India chief, however, did not mention whether the pressures included rising global crude oil prices that touched $135 a barrel.
India’s fiscal deficit is estimated to fall to 2.5% of the GDP in 2008-09 against 3.1% the previous fiscal.
The Fiscal Responsibility and Budget Management (FRBM) Act mandates the government to reduce its fiscal deficit to 3% and wipe out revenue deficit by 2008-09.
Reddy further pointed out that India’s fiscal deficit as a percentage of GDP is one of the highest in the world.
The fall in fiscal deficit, however, could be because of reduction in public expenditure, as he noted that there was a decline in public investment.
The RBI Governor said that fiscal situation of states’ too had improved significantly, but they also have not factored in some underlying fiscal pressures, though not as much as the Centre.