ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Off with Deficits

Off with Deficits! IN what the finance minister has in his budget speech described as a historic step, the government has agreed to accept a ceiling on its borrowing from the Reserve Bank against ad hoc treasury bills in 1994-95 and to altogether phase out such borrowing by 1997-98. This decision has, however, to be viewed against the series of measures taken as part of fiscal adjustment and financial sector reform. The notion of an absolute limit on, and eventual elimination of, the budget deficit as conventionally understood would have had some credibility when the government was still in control of a wider revenue base. Now, after the fiscal distortions introduced in the name of tax reform and opening of the economy to international competition, it is unlikely for some years to come at least that the government will be capable of sustaining any fiscal discipline.

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