sanction like situation in post - pokhran scenario, and border conflict during mayjune 1999. seen in this context, this robust macroeconomic performance, in the face of recent oil as well as food shocks, demonstrates the vibrancy and resilience of the indian economy. external sector the indian economy has evolved from a virtually closed economy until early 1980s to one that is opening up and rapidly integrating into the global economy since the commencement of major reforms in early 1990s. in terms of a traditional measure of openness, the ratio of exports and imports ( both goods and invisibles ) to gdp has risen steadily from 21. 1 per cent in 1991 - 92 to over 50 per cent in 2005 - 06 and is expected to have gone up further in 2006 - 07. both exports and imports have been rising above long - term trend in recent years. the merchandise trade deficit is currently close to 7 per cent of gdp ; however, the current account deficit is under 1. 5 per cent of gdp, mainly due to the knowledge and competitive advantage we have in services and the steady support from remittances from indians working abroad. the liberalisation of the current account took place in the early part of the reforms and we attained current account convertibility in august 1994. in india, capital account liberalisation is sequenced in response to domestic developments, especially in real and fiscal sectors, and the evolving international financial architecture. fiscal federalism under india ’ s federal system of government, the constitution allocates the revenue powers and expenditure functions between the central and state governments. the borrowing by the sub - national governments is in effect subordinated to prior approval by the national government. furthermore, state governments are not permitted to directly borrow externally. the fiscal management in the country has significantly improved, specially, after the adoption of the fiscal responsibility and budget management act, 2003 by the central government. the state governments are also adopting similar acts and have made consistent efforts to improve fiscal management. the fiscal consolidation, in terms of reduction in fiscal deficit, is taking place in the finances of both the central and state governments. the fiscal - management of central government is broadly in the direction of achieving the targeted ratio of gross fiscal deficit ( gfd ) to gross domestic product ( gdp ) to three per cent and eliminate revenue deficit ( rd ) by 2008 - 09. it may be noted that the gfd / gdp and rd / gdp ratios are already budgeted to reduce to 3. 3 per cent and

gdp growth generated from agriculture is only marginally above the rate of growth of the population, which is not adequate to ensure rapid poverty reduction. on may 29, 2007, our honourable prime minister announced a major scheme to double the growth rate of agriculture to 4. 0 per cent over the 11th plan period. the government would provide rs. 250 billion for new farm initiatives launched by states. a time - bound food security mission was also announced to counter rising prices of food products and to ensure visible changes in their availability over three years. second, the growth story in any developing country can not be complete without assessing its impact on the poverty and employment situation. the planning commission has stressed that india should strive for “ more inclusive growth ”. the number of people living below the poverty line has decreased from 36 per cent in 1993 - 94 to 22. 0 per cent in 2004 - 05. again, the issue is to bring more and more people out of poverty by providing them the productive employment opportunities. the approach paper to 11th five year plan suggests that doubling the growth of agricultural gdp to 4 per cent per annum will improve rural employment conditions, by raising real wages and reducing underemployment. however, even if this is attained, an overall growth of 9 per cent will further increase income disparity between agricultural and non - agricultural households, unless around 10 million workers currently in agriculture find remunerative non - agricultural employment. this poses a major challenge not only in terms of generating non - agricultural employment but also in matching its required location and type. third, delivery of essential public services such as education and health to large parts of our population is a major institutional challenge. it is strongly felt that education will empower the poor to participate in the growth process and the large gaps in availability of health care, in terms of minimum access to the poor, need to be filled. fourth, a critical constraint to economic growth in india in recent years has been the infrastructure deficit. the approach paper to the 11th five year plan has estimated that for accelerating the gdp growth from 7 to 9 per cent, there is a need for accelerating the current level of investment in infrastructure from 4. 6 per cent of gdp to 8 per cent during the plan period. the issue of providing adequate and quality infrastructure has already attracted attention of policy makers at all levels. the most important issues here are regulatory framework and overall investment climate, which are being addressed by the government. apart from higher levels of investment, issues of governance and management