In order to absorb the impact of FPC, the Government envisaged to bear it through a combination of additional resource mobilisation and expenditure reducing measures. However, as alluded to above, there was a decline in the tax-GDP ratio in the late 1990s, which exacerbated impact on the Government finances.
Looking forward, assuming that the scale of the impact of the SPC to be similar to FPC in proportionate terms, the pressures on expenditures may amount to about 1.0 per cent of GDP per annum for the Centre and States combined, spread over a 3-4 year period.