Fiscal Policies and Challenges in South Asia

This paper presents a brief overview of the extant fiscal situation in South Asian countries. In
particular, I emphasize low tax/GDP ratios and inelastic expenditure/GDP ratios which then
lead to structurally entrenched fiscal deficits. The paper also reports on the sustainability of
fiscal and current account deficits in the South Asian countries. Finally, the paper reports on
some important issues in tax reform in South Asian counties. These include explaining and
finding an antidote for low tax/GDP ratios and analyzing the scope for a VAT. Some general
principles are enunciated but many of the required reforms have to be context specific.