in tax revenues was mainly on account of the buoyancy in direct taxes. on the expenditure front, while the total expenditure of the centre declined from 16. 8 per cent of gdp in 2002 - 03 to 14. 1 per cent in 2006 - 07 ( re ), the capital outlay rose from 1. 2 per cent to 1. 6 per cent of gdp. the movement in key deficit indicators reflects the progress made so far in fiscal consolidation. fiscal deficit of the centre and the states taken together has declined from 9. 2 per cent of gdp in 2002 - 03 to 6. 4 per cent in 2006 - 07 led by reduction in revenue deficit from 6. 7 per cent of gdp to 2. 1 per cent. apart from the quantitative improvement, a salient feature of the fiscal consolidation underway has been some qualitative progress made as reflected in the reduction in the proportion of revenue deficit to gross fiscal deficit. as a result, the dissavings of government administration declined from 5. 2 per cent of gdp in 2002 - 03 to 1. 3 per cent in 2006 - 07. the savings of the departmental enterprises improved marginally from 0. 5 per cent in 2002 - 03 to 0. 6 per cent of gdp in 200607. the major component of public sector savings, i. e., savings of non - departmental undertakings, has, interestingly, exhibited a steady improvement since the 1970s and this process has continued during the reforms period ( table 4 ). thus public sector enterprises have exhibited continued and steady improvement in their commercial functioning since the early 1990s. consequently, since 2003 - 04 onwards, total public savings have turned positive again. the savings rate of the overall public sector improved from ( - ) 0. 6 per cent of gdp in 2002 - 03 to 3. 2 per cent of gdp in 2006 - 07. notwithstanding the striking improvement over the past few years, it may be noted that the public sector savings rate at 3. 2 per cent during 2006 - 07 was still less than the peak of over five per cent touched in 1976 - 77. nonetheless, the turnaround of 5. 2 percentage points of gdp in public sector savings – from a negative 2. 0 per cent of gdp in 2001 - 02 to a positive 3. 2 per cent of gdp in 2006 - 07 – has been a key factor that has enhanced domestic savings from 23. 5 per cent to 34. 8 per cent over the same period. the public sector investment rate increased from

offering of customized products etc address the supply side factors while the financial literacy initiatives address the demand side factors by sensitizing the people of the need for and benefits of joining the formal financial system. ucbs, by their structure and nature of clientele, are well designed to cater to financial inclusion. the very basis of co - operative structure is mutual help and thrift. considering the specific features of ucbs such as their organizational structure ( member driven ), clientele, easy access and reputation as a friendly neighbourhood bank, these highly localised institutions have the potential for widening and deepening financial inclusion in their area of operation. measures undertaken to promote financial inclusion it has been rbi ’ s endeavour to remove all hurdles in the way of its regulated entities in achieving financial inclusion objectives. some of the salient measures undertaken in this regard are : bis central bankers ’ speeches introduction of new products ( i ) opening of “ no - frills ” accounts : a “ no frills ” account is one for which no minimum balance is insisted upon and for which there are no service charges for not maintaining the minimum balance, introduced as per rbi directive in 2005. banks have been advised to provide small over drafts in these “ no frill ” accounts. ( ii ) general credit cards ( gcc ) / kisan credit cards ( kcc ) : gccs / kccs help purvey credit where the credit facility is in the nature of a revolving credit entitling the holder to withdraw up to the limit sanctioned., limits are sanctioned without insistence on security or purpose, based on the assessment of household cash flows. interest rate on the facility is completely deregulated. relaxed regulatory requirements i. relaxed regulatory dispensation on know your customer ( kyc ) norms : kyc requirements for small accounts were relaxed in august 2005, by stipulating that introduction by an account holder, who has been subjected to full kyc drill, would suffice for opening such accounts, or, that the bank can take any evidence to its satisfaction as to the identity and address of the customer. during the year, it has been further relaxed to include job card issued by nrega duly signed by an officer of the state government or the letters issued by the unique identification authority of india containing details of name, address and aadhaar number as a valid identity proof. ii. simplified branch authorisation : to increase the reach of banking network, domestic scheduled commercial banks have earlier been permitted to