li inan e in ndia 18.21
and the WB about the unsustainability of the force cut could be completed on the
fiscal deficits. It was at the behest of the IMF that borders, etc.;
India started the politically and socially painful (e) Budgetary supports to the loss-
process of fiscal reforms, a step towards fiscal making PSUs to be an exception than
consolidation.50 A number of steps were taken by a rule;
the government at the Centre in this direction and
(f) Expenditure reform started by the
there had been incessant attempts to do the same
governments in different areas and
in the states’ public finances too. Major highlights
departments;
in this direction can be summed up as given
below: (g) General Services to be motivated
1. Policy initiatives towards cutting revenue towards profit with subsidised services
deficits: to the needy only (railways, power,
water, etc.);
(i) Cutting down expenditure—
(a) Cutting down the burden of salaries, (h) Postal deficits to be checked by
pensions and the PFs (down-sizing/ involving the post offices in other
right-sizing of the government, out areas of profit;
of every 3 vacancies 1 to be filled (i) Higher education declared as non-
up, interest cut on the PF, pension priority sector; fees of institutions of
reforms-PFRDA, etc.); professional courses revised upward;
(b) Cutting down the subsidies etc.
(Administered Price Mechanism in (ii) Increasing revenue receipts:
petroleum, fertilizers, sugar, drugs (a) Tax reforms initiated (Cenvat, VAT,
to be rationalised, it was done with Service Tax, GST proposed, etc.);
mixed successes);
(b) The PSUs to be disinvested and even
(c) Interest burden to be cut down (by privatised (if a political concensus
going for lesser and lesser borrowings, reached which alludes today);
pre-payment of external debts, debt
(c) Surplus forex reserves to be used in
swaps, promoting external lending,
minimal dependence on costlier external lending and purchasing
external borrowings, etc.); foreign high quality sovereign bonds,
etc.
(d) Defence being one major item of the
expenditure bilateral negotiations (d) State governments allowed to go
initiated with China and Pakistan for market borrowing for their plan
(the historical and psychological expenditure, etc.
enemies against whom the Indian 2. The borrowing programme of the
defence preparedness was directed government:
to, as supposed) so that the defence (i) The Ways and Means Advances (WMA)
50. imposed some macro economic conditions on scheme commenced in 1997 under which
the economy while India borrowed from it for its BoP the government commits to the RBI about
correction in 1990–91. One among the conditions the amount of money it will give as part
was cutting down the government expenditure (i.e.,
salaries, pensions, interest and subsidies, etc.) by of its market-borrowing programme, to
10 per cent every year. bring transparency in public expenditure