Patience is needed because it takes time for underlying inflation dynamics to gain momentum and support a durable convergence of inflation towards our aim. Persistence is needed because the recovery in inflation is predicated on a substantial degree of monetary policy accommodation. And prudence is essential because of uncertainties about the transmission of unconventional monetary policy measures on the way to normalisation.
Despite these fiscal strains, key structural changes are notable. Aside from near elimination of the revenue deficit, prudent fiscal management has helped reduce the share of interest payments in the total outlay from 33% in FY02 to 17.6% in FY05 – a 15 percentage points decline in just four years. This in turn helped achieve primary surplus.