The report also said that in the capital account, foreign investment inflows were lower at $2.2 billion, during the first seven months of the current fiscal, down from $2.6 billion in the corresponding period of the last fiscal while the annual point-to-point inflation as on December 31, 2000, stood at 8.2 per cent, up from 2 per cent as on January 1 this year.

These ominous figures were released by the RBI in its Report on Currency and Finance 1999-2000 on Monday.

"Finances of both the Centre and the states suffered a deterioration in 1999-2000 on account of slippages in budgeted revenues and expenditures. The gross fiscal deficit of the Centre in the revised estimates for 1999-2000, at Rs 1,08,898 crore or 5.6 per cent of GDP, exceeded the budget estimates by 1.6 per cent of GDP," said the RBI in its Report.

In the case of states, expenditure overruns on account of the lag effects of the Fifth Pay Commission revisions, and costs on account of natural calamities took the consolidated fiscal deficit of the states to 4.9 per cent of the GDP in the revised estimates for 1999-2000 or nearly one per cent of the GDP above budgeted estimates. "The combined fiscal deficit of the Centre and the states rose to 9.9 per cent of the GDP, the highest level in the 1990's," RBI said.

The reasons cited by the RBI is that in 1999-2000, there was revenue shortfall of 1.8 per cent in the revised estimates of the Centre, largely on account of custom and excise collections falling short of the budgeted projections on account of low non-oil import demand and rate reductions. Corporate tax also fell. Other taxes on income improved by non-tax revenue was moderate. In the case of states, it was a modest revenue shortfall at 0.3 per cent of GDP due to lower realisations of taxes on commodities in the transition towards uniform VAT. Plus, revenue expenditure exceeding exceed budget estimates by nearly four per cent with non-plan revenue expenditure at 83.9 per cent of revenue expenditure for 1999-2000 (revised estimates).

The Report cited sluggish portfolio inflows. Net FII inflows were uneven: $421 million during the first seven months of 2000-01 as against $854 million during the corresponding period of the last fiscal. The saving grace was that direct investment inflows were marginally higher at $1.6 billion during this period ($1.2 billion) while net-NRI deposit inflows were $1.3 billion ($1.2 billion). These normal inflows were bolstered, though, by the `India Millennium Deposit' inflows of $5.5 billion. The central bank also mentioned that average WPI inflation was up in 2000-01 largely on account of direct and indirect effects of administered price revisions.

"The annual annual point-to-point inflation as on December 31, 2000, stood at 8.2 per cent, up from 2 per cent as on January 1, 2000. The core inflation rate as on December 20, 2000, worked out to 3.5 per cent on a point-to-point basis against the headline inflation rate of 8.2 per cent," the RBI said. The WPI inflation stood at 4.5 per cent during 2000-01 (up to December 30, 2000) as against the 2.9 per cent of the corresponding period of the last fiscal. `Primary' inflation jumped up to 3.2 per cent from 1.3 per cent while manufacturing inflation was almost stable at 2.6 per cent (2.5 per cent).