Without detailing the reforms, the CAG report said as resources available for current services have depleted relative to GDP, it is critical that these are used with optimal efficiency.
Inefficiencies result from the inability to use the resources in time, delaying projects and programme implementation rigidities like lapsing of funds and opacities in Budget proposals, said the report, tabled in Parliament on Tuesday.
The report said the ratio of assets to liabilities of the government declined from an average of 57.68% during the Seventh Five Year Plan to 39.36% in 2004-05, indicating that around 60% of the aggregate fiscal liabilities did not have any assets back up.
Pointing out that assets were also growing at a lower rate than the fiscal liabilities, the CAG report said overall buoyancy of assets during 1985-2005 was 0.71 indicating that for every 1% increase in liabilities, assets had grown only at 0.71%.
Asset buoyancy continued to decelerate over the years, the report said. CAG also said the Centres scarce borrowed resources could only be partly allocated for capital formation during 1985-2005 since revenue deficit continued to be the dominant component of fiscal deficit during the period.
Revenue deficit is the excess of revenue expenditure of the government over its revenue receipts, representing net saving of the government and its shift to present consumption, while fiscal deficit represents additional borrowings of government.
The proportion of revenue deficit in overall fiscal deficit increased from an average of 46.26% during seventh plan period of 1992-97 to 75.82% in 2005, the report said.
The ratio of revenue deficit to fiscal deficit had a positive shift rate of 6.88% during 1985-2005, the report said.
Continued use of borrowed funds for meeting current expenditure indicated erosion in asset back up, the report said.
Net capital expenditure accounted for little over a quarter of fiscal deficit during 1985-2005, the report said, adding in last three years, the recovery of loans and advances exceeded the issue of fresh loans and the surplus actually financed part of the fiscal deficit.