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Monday, Dec 15, 2003

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Fiscal deficit

This is with reference to "Fiscal Deficit, the real villain?" (Business Line, December 12). The article gives a clear picture as to where the problems lie with regard to India's financial management. The job of managing the fiscal deficit in India is certainly not an envious one.

Although development institutions keep harping that the percentage of fiscal deficit must reduce, pruning costs especially those related to States is very hard.

Expenditure need in States differ and are relatively unpredictable (certain States have greater tendency to encounter natural disasters, communal riots and other social problems) and, hence, allocation of funds from Centre to State becomes difficult. Coupled with this, corruption is another major problem.

However, one feels that with increased privatisation and more foreign players operating in India, the tax base must widen. Only increase in GDP can result in higher tax income and the government must do all it can to ensure this. This assumes more importance particularly in India, as revenue expenditure is not in line with productivity.

Lastly, the government must understand that they should be in the business of governing and not look to running commercial enterprises.

Vivek Sivaram

Chennai

Letters to the editor and contributions can be sent by e-mail to: bleditor@thehindu.co.in

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