Govt's shrinking fiscal space

But national parties make grand promises and then, when in power, scramble to find even meagre additional resources.

Election year should be a time when we seriously reflect on the medium-term structure of fiscal policy. But election year also involves an interim Budget which, by definition, should not take up much analytical space. But unfortunately, it does, distracting attention from medium-term fiscal issues. 

There are four important medium-term trends in central government finances that are of economic interest. 

The central government is shrinking: Central government expenditure has been falling continuously as per cent of GDP. Fiscal consolidation is largely due to this shrinking — 76 per cent of the fall in fiscal deficit since 2014-15 is directly because