Minister of State in the Ministry of Finance SHRI PAWAN KUMAR BANSAL
(a) : Due to introduction of VAT and various other tax reforms by
different States, the annual growth of States` Own tax revenue has
been 19.6 percent in 2005-06 (RE) as compared the annual average
of the same at 13.1 percent during the financial years 2000-05.
This, inter-alia, has contributed to the reduction of revenue and
fiscal deficits as percentage of Gross Domestic Product (GDP) in
2005-06 (RE) when compared to the corresponding average deficit levels
during the financial years 2000-01 to 2004-05 as indicated below:
2005-06 (RE) 2000-05 Average
Revenue Deficit (% GDP) 0.57 2.23
Fiscal Deficit (% GDP) 3.23 4.02
(b): Under States`s Fiscal Reforms Facility the State sector as
whole was expected to reduce revenue deficit as percentage of revenue
receipts by 25 percentage points in 2004-05 over 1999-00. As
against above, the State sector has achieved an improvement in the
above ratio by 16 percentage points during the five years which is
significant. During the period, the fiscal deficit has come down to 3.47%
of GDP from 4.64% of GDP in 1999-2000.
Under restructuring of Public Finances, the Twelfth Finance
Commission has recommended that each State should enact fiscal
responsibility legislation as a pre-condition for availing the
Debt Consolidation and Relief Facility, aimed at, inter-alia,
eliminating their revenue deficit by 2008-09 and reducing fiscal
deficit to 3% of GSDP. So far, 19 States have furnished their
Fiscal Responsibility and Budget Management Act (FRBMA). It is
expected that the remaining States shall also enact their FRBMA and
undertake the requisite fiscal correction to achieve the targets.