Corruption, coalition politics hurting reforms: Govt

The Reserve Bank too expressed concern over the deteriorating state of government finances and called for fiscal consolidation to control inflation.

The government, in the Economic Survey shared RBI's concerns that inflation and fiscal slippages were among the main challenges before the economy. It said there was a slackening in the pace of reforms and high-profile corruption scandals along with "welcome civil society activism" have led to delay in decision making by bureaucrats.

The Survey presented before Parliament by Finance Minister Pranab Mukherjee said, "the coalition politics and federal considerations played their roles in holding up economic reforms on several fronts, ranging from diesel and LPG pricing...to...FDI in retail." It also attributed economic slowdown partly to domestic issues "like pressures of democratic politics".

RBI, while keeping interest rates unchanged to keep prices under control in its monetary policy review, pointed to the deterioration in central government finances. "Credible fiscal consolidation will be an important factor in shaping the inflation outlook," RBI Governor D Subbarao said.

Agreeing with the RBI on the need for fiscal consolidation, the Survey said: "The principal way in which this has to be achieved is by raising tax-GDP ratio and cutting down wasteful expenditures."