Fiscal reforms and performance in Gujarat

Abstract

The chapter reviews the fiscal performance and reforms during the last two decades in Gujarat. In the early 1990s, various deficits and interest payment crossing prudent limits had raised serious concerns about sustainability. The state had to design and carry out fiscal reforms under tremendous pressure by the late 1990s. The devastating earthquake of 2001, however, forced the government to divert efforts and funds to meet emergent needs of the affected population and infrastructure. During the last decade, fiscal reforms with simplification and rationalization of taxes and expenditures started moving fast. It led to a sharp decline in the size of the government from 17% to about 13%. The state has been comfortably achieving almost all Fiscal Responsibility Legislation targets including the cap on contingent liabilities. A clear strategic shift in expenditure allocation in favor of social sectors is visible during the last decade vis-à-vis the previous decade.