A Macro-Fiscal Modeling Framework for Forecasting and Policy ...

(v) External Sector
Chart 1.7 shows the time profile of exports and imports as percent of GDP. Both exports-
GDP and imports–GDP ratios stood at around 7.5 percent in 1950-51. They declined to
around 4.2 percent in 1970-71. After that the economy has become more globalized with
the exports-GDP ratio increased to 23 percent in 2007-08 and the imports to GDP ratio
increased to 27 percent.
(vi) Fiscal Sector
The key variables of the fiscal sector are revenue receipts and expenditures and their
components, and deficits of the central and the state governments. As far as the gross
tax revenues and primary revenue expenditures of the central government are
concerned, there have been very significant changes over the years. During 1950-51 to
1980-81, the gross tax revenues of the centre increased from about 4 percent of GDP to
about 10 percent while the primary revenue expenditure increased from about 3.5
percent to about 8 percent. In 1990-91, the former increased to 11 percent while the
latter to 10 percent of GDP. Then they started declining and reached a level of around
9.6 percent in 2002-03. After that the tax-GDP ratio started increasing and reached a
peak of 13.7 percent in 2007-08 while the primary revenue expenditure relative to GDP
stood around 9. 8 percent (Chart 1.8).
Chart 1.8: Primary Revenue Expenditure and Gross Tax Revenues of Centre as
% of GDP
16
14
12
10
8
6
4
2
0
Primary Revenue Expenditure
Gross Tax Revenues
18