Keeping in view the inflation risk, the Reserve Bank embarked on a calibrated exit from the expansionary monetary policy.
The Union Budget of 2010–11 has begun the process of fiscal consolidation by programming a reduction in the revenue deficit to 4.0 per cent of GDP from 5.3 per cent, and in the fiscal deficit to 5.5 per cent from 6.7 per cent during the previous year. Going forward, three major uncertainties cloud the outlook for inflation.