Recent trends in Fiscal Performance of Himachal Pradesh

The fiscal reform at the state level is important from the viewpoint of both macroeconomic stability and microeconomic allocative efficiency. The Constitution assigns a pre-eminent role to states in agricultural development, poverty alleviation, human development and co-equal position in the provision of physical infrastructure. The predominant role in allocation and cooperative role in distribution makes states fiscal operations critical for macroeconomic stabilization as well. Although the Constitution places limitations on the states’ borrowing powers, in actual practice they are able to run large deficits and that makes fiscal reforms at the state level critical for achieving overall fiscal consolidation in the country. A state specific assessment of fiscal position assumes importance in view of the wide disparities that exist among the Indian states. So, the need of the hour is to frame an effective and time-bound policy measures to enhance revenues particularly non-taxes and shift in expenditure pattern towards economic growth of the state. This paper is an attempt to examine current programme options from the point of view of macro-economic stability and growth, study the public finance at state level and presents an analytical review and assessment of fiscal situation of Himachal Pradesh also examine the review of policy measures to strengthen the state finances and to bring down the fiscal deficit ratio to make a balance in the GDP, expected to lower inflation and interest rates in the economy and strengthen the sustainability of fiscal balance in the long run.