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Full-fledged fiscal crisis cannot be ruled out in India: WB
New Delhi, July 24: Warning that full-fledged fiscal crisis was imminent for India, the World Bank said the fiscal deficit could swell upto 11.8 per cent of GDP by 2006-07, thus limiting growth and job creation and asked the planners to soon put in place a roadmap for averting such crisis.
New Delhi, July 24: Warning that full-fledged fiscal crisis was imminent for India, the World Bank said the fiscal deficit could swell upto 11.8 per cent of GDP by 2006-07, thus limiting growth and job creation and asked the planners to soon put in place a roadmap for averting such crisis.
"India's large fiscal imbalances pose a serious threat to sustained growth and development over the medium term...If this negative cycle continues, a full-fledged fiscal crisis cannot be ruled out over the medium term," the bank said in the latest country-specific analysis.
Applying a base-line approach, the World Bank said fiscal deficit was likely to be 11.8 per cent in 2002-03-2006/07 and on a reform scenario, it was expected to be 10.3 per cent for the period. Lamenting that "it is politically easy to downplay the risk, hoping higher growth and lower interest rates will eventually solve the fiscal problem, it said, "experience suggests that it will be unwise to sit back and wait for such a virtuous cycle to emerge."
The bank said the Centre and states have to be pro-active in reducing the fiscal deficit, shifting expenditures into more productive areas and removing structural impediments to higher private investment and productivity.
The general government fiscal deficit (Centre and states consolidated) averaged 9.0 per cent before the crisis period of 1991. Subsequently, it fell sharply during the period of high growth and fiscal restraint that marked the eight plan period, but resumed growing "equally sharply" after 1997-98, returning to the 9-10 per cent of GDP during the ninth plan period. Bureau Report
Applying a base-line approach, the World Bank said fiscal deficit was likely to be 11.8 per cent in 2002-03-2006/07 and on a reform scenario, it was expected to be 10.3 per cent for the period. Lamenting that "it is politically easy to downplay the risk, hoping higher growth and lower interest rates will eventually solve the fiscal problem, it said, "experience suggests that it will be unwise to sit back and wait for such a virtuous cycle to emerge."
The bank said the Centre and states have to be pro-active in reducing the fiscal deficit, shifting expenditures into more productive areas and removing structural impediments to higher private investment and productivity.
The general government fiscal deficit (Centre and states consolidated) averaged 9.0 per cent before the crisis period of 1991. Subsequently, it fell sharply during the period of high growth and fiscal restraint that marked the eight plan period, but resumed growing "equally sharply" after 1997-98, returning to the 9-10 per cent of GDP during the ninth plan period. Bureau Report