The factors responsible for such a deterioration are many and include factors, such as, growing burden of: a) interest payments, b) pension liabilities, and c) administrative expenditure, mounting losses of State owned public enterprises, inappropriate user charges, increased contingent liabilities and deceleration in Central transfers. Such fiscal stress seriously erodes the States’ capability to discharge its paramount responsibility for developing social and economic infrastructure.
It has increasingly been recognised that it is the State  BIS Review 23/2005  3  finances where the government sector’s interface with the people is the maximum. Hence, fiscal consolidation and progressive implementation of fiscal and institutional reforms by the States will have a direct bearing on the quality of life of people.