'The fact that we are on a somewhat sounder fiscal footing than had been the case historically has allowed the government significant elbow room to act to contain the fallout of the crisis,' Kelkar claimed.

Stating that the pause on the road to fiscal reform is temporary, he wanted the central and state governments to resume medium-term fiscal reform.

The chairman added that the Fiscal Responsibility and Budget Management (FRBM) legislation had helped the central and state governments reduce deficits last fiscal.

The Reserve Bank of India projects a revenue surplus for all states at 0.54 percent of the gross domestic product (GDP) in 2008-09 in contrast to a revenue deficit of 2.3 percent in 2002-03, Kelkar said.

During the same period, the fiscal deficit has reduced to 2.1 percent of GDP from 4.1 percent the year before.