NK Singh, chairman of the FRBM panel that had suggested that the fiscal deficit be trimmed to 3% in the current financial year itself, said on Thursday the delay in achieving the target wasn’t a “calamity” and that the Centre has taken enough measures to display fiscal discipline. Amid criticism of the Reserve Bank of India for its purported failure to detect a $2-billion fraud at Punjab National Bank, Singh lamented the near-absence of any parliamentary supervision of regulators, and advocated regular interactions between the legislature and watchdogs. He also called for the setting up of a separate entity within the central bank with the responsibility of on-site supervision of banks, in sync with the Narasimham Committee recommendations. The concept of a super regulator also needs to be debated, he added. On fiscal deficit, Singh, who is also the chairman of the 15th Finance Commission, said: “It’s true that the Centre has shifted the (fiscal) goalpost by 2-3 years, leading to postponement of (the goal of achieving) the ideal debt-to-GDP ratio. But in my view, that’s no calamity.”
Given that the Centre hasn’t invoked an escape clause even when it undertook structural reforms like the goods and services tax with unintended revenue implications and thus had the scope to do so reflects its “remarkable commitment to fiscal consolidation”, Singh said at the Idea Exchange programme of the Indian Express Group. The escape clause allows the Centre to go up to a 0.5 percentage point fiscal slippage under exceptional circumstances. The FRBM panel had suggested that the Centre aim for a fiscal deficit of 3% of the GDP for three straight years starting from 2017-18 and gradually reduce it to 2.5% by 2022-23. The government now intends to meet the 3% target by 2020-21, compared with 3.5% for the current fiscal. Similarly, although the Centre accepted the FRBM panel’s recommendation to lower its own debt burden to 40% of GDP from around 49% in the last fiscal, it relaxed the 2022-23 deadline suggested by the panel and will instead meet this target by only 2024-25. Singh said despite these deviations, the centre has accepted, almost in entirety, the panel’s report and acted with alacrity in implementing its far-reaching recommendations.