ben s bernanke : long - term fiscal challenges facing the united states testimony of mr ben s bernanke, chairman of the board of governors of the us federal reserve system, before the committee on the budget, us senate, washington dc, 18 january 2007. * * * chairman conrad, senator gregg, and other members of the committee, i am pleased to be here to offer my views on the federal budget and related issues. at the outset, i should underscore that i speak only for myself and not necessarily for my colleagues at the federal reserve. as you know, the deficit in the unified federal budget declined for a second year in fiscal year 2006, falling to $ 248 billion from $ 319 billion in fiscal 2005. as was the case in the preceding year, the improvement in 2006 was primarily the result of solid growth in tax receipts, especially in collections of personal and corporate income taxes. federal government outlays in fiscal 2006 were 20. 3 percent of nominal gross domestic product ( gdp ), receipts were 18. 4 percent of gdp, and the deficit ( equal to the difference of the two ) was 1. 9 percent of gdp. these percentages are close to their averages since 1960. the on - budget deficit, which differs from the unified budget deficit primarily in excluding receipts and payments of the social security system, was $ 434 billion, or 3. 3 percent of gdp, in fiscal 2006. 1 as of the end of fiscal 2006, federal government debt held by the public, which includes holdings by the federal reserve but excludes those by the social security and other trust funds, amounted to about 37 percent of one year's gdp. official projections suggest that the unified budget deficit may stabilize or moderate further over the next few years. unfortunately, we are experiencing what seems likely to be the calm before the storm. in particular, spending on entitlement programs will begin to climb quickly during the next decade. in fiscal 2006, federal spending for social security, medicare, and medicaid together totaled about 40 percent of federal expenditures, or roughly 8 - 1 / 2 percent of gdp. 2 in the most recent long - term projections prepared by the congressional budget office ( cbo ), these outlays are projected to increase to 10 - 1 / 2 percent of gdp by 2015, an increase of about 2 percentage points of gdp in less than a decade. by 2030, according to the cbo, they will reach about 15 percent of gdp.

in the country has risen sharply by two and a half times since 2010. the flow of resources to the commercial sector in india almost doubled from ₹12 lakh crore in fy 2012 to ₹22 lakh crore in fy 2022. 7 while banks continue to be a dominant source of financing, market borrowings8 of the commercial sector increased from ₹74, 000 crore in fy 2012 to ₹3, 16, 000 crore in fy 2022. as our economy and financial markets grew, the integration with the world economy and global financial markets has also risen. the growing economy and our aspirations to be and remain among the fastest growing economies has expanded our funding needs. all these necessitate larger and deeper financial markets. the policy response to headwinds 9. it is relevant to look at some of our policy responses in recent times, especially to major global headwinds. each successive episode of turmoil over the last decade and half has posed a specific set of challenges for the economy. each has warranted a specific response. 10. in 2008, policy actions were aimed at ensuring comfortable system liquidity ; augmenting forex reserves and maintaining a crisis management framework to support the economy through the global financial crisis. conventional tools such as policy interest rates and source : ministry of statistics and programme implementation source : ministry of statistics and programme implementation, rbi balance of payment statistics source : world bank source : reserve bank of india source : rbi handbook of statistics market borrowing includes public & rights issues by non - financial entities, gross private placements by non - financial entities and net issuance of commercial papers subscribed to by non - banks. cash reserve ratio ( crr ) were used. measures to manage forex liquidity included, inter alia, relaxing the interest rate ceiling on foreign currency deposits by non - resident indians and external commercial borrowings ( ecb ) for corporates. unconventional measures included a rupee - dollar swap facility for indian banks, a refinance window for mutual funds and a special purpose vehicle for supporting nonbanking financial companies. 11. post the announcement of early taper of quantitative easing by the federal reserve in 2013, the need for restoring confidence of market participants and containing the pressure on the rupee guided the reserve bank ’ s policy responses. monetary conditions were tightened through unconventional tools. forex market measures included both direct intervention and administrative measures to manage capital flows. these included import restrictions of nonessential items, opening of a special