This improvement however reflected one off revenue proceeds from 3G/BWA auctions as also revenue buoyancy associated with cyclical upswing in growth, as reflected in 20 percent growth in nominal GDP relative to 12.5 percent budgeted growth in nominal GDP. Thus, the role of permanent or structural drivers of fiscal consolidation was rather weak.
In 2011–12, developments so far indicate that fiscal deficit target of 4.6 percent of GDP could be breached, which will have implications for domestic inflation. The moderation in private demand resulting from anti-inflationary monetary policy stance of the RBI will be partly offset by the expansion in public sector demand in terms of the size of the fiscal deficit.