FISCAL SECTOR REFORMS AND ITS IMPLEMENTATION FOR ECONOMIC STABILIZATION

Abstract

Fiscal reforms refer to changes in the fiscal sphere or fiscal policy. Fiscal policy is concerned with revenue and expenditure policies of the government. How to use the revenue and expenditure policies of the government so as to impact the aggregate level of demand for goods and services. The need for economic reforms in general and fiscal reforms in particular can best be understood if we examine the nature of the Indian economy in 1991. The fiscal crisis was a result of the fiscal profligacy of the Central and State government during 1980’s. This contributed to a balance of payments crisis necessitating wide ranging economic reforms, of which fiscal reforms is the important one. The need for restoring fiscal balance by reducing fiscal deficits was widely recognized and a number of tax reforms and expenditure reforms were initiated. Tax reforms included expanding the tax base, reducing the rates leading to improved tax compliance and making the tax administration more efficient. These measures increased tax revenues considerably.