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Fiscal policy:

In economics, fiscal policy is the use of government expenditure and revenue collection to influence the economy. Fiscal policy can be contrasted with the other main type of macroeconomic policy, monetary policy, which attempts to stabilize the economy by controlling interest rates and the money supply. The two main instruments of fiscal policy are government expenditure and taxation. Changes in the level and composition of taxation and government spending can impact on the following variables in the economy:

* Aggregate demand and the level of economic activity;

* The pattern of resource allocation;

* The distribution of income.

The budget for the 2010-2011 fiscal year marks the beginning of consolidation efforts after the stimulus measures and the fiscal slippage of the previous two years due to elections and large one-time spending. As a share of GDP, the deficit is expected to reach 7.8% of GDP (including off-budget food, fuel and fertilizer price subsidies of 1.7% of GDP) from 9.6% last year and 11.8% in 2008/2009. The improvement will come from reduced subsidies and greater revenues from the acceleration of economic growth, the reversal of stimulus-related tax cuts, the revival of the privatization program, as well as the one-time sale of G3 licenses, which generated over USD 15 billion. Solvency indicators will continue to improve, but are expected

to remain above comfortable levels, with public debt to GDP falling to 68% by 2014-15 controlling and managing fiscal discipline while tackling competitive demands on public resources and tax expenditures against varied and frequently contravening expectations of stake holders is a tough job.

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The last three years fiscal results as measured against the deficit targets, show the effectiveness of managing resources on the FRBMA compliant road map. It is reassuring to see that deficits have been kept within the mandated limits. The upward growth has propelled the economy to...