Consolidation of Central Government finances is the goal of fiscal policy at the Centre – the targets are: the gross fiscal deficit (GFD) of 3.0 per cent of GDP and the elimination of the revenue deficit by 2008-09. The fiscal position of State Governments also continues to undergo slight correction in terms of key deficit indicators.
Against this background, it may be useful to analyse the implications of global financial imbalances for India in terms of the likely impact on four separate balance sheets - of the government, of the Reserve Bank of India, of the corporate sector and of the banking sector.