With the Centre already breaching the deficit targets stipulated under the Fiscal Responsibility & Budget Management (FRBM) Act, the finance ministry is seeking to ask the new government to amend it. In light of the changed economic scenario, the ministry feels there is a need to abandon the original annual goalposts laid down by the 2004 law and adopt only a medium-term outlook.
?To ensure that Parliamentary propriety is maintained, we realise there is a need to amend the FRBM act. But a final decision will rest with the new government,? a finance ministry official told FE.
Under the FRBM Act targets, the revenue deficit was to be wiped out by 2009-10 through a 0.5% of GDP annual reduction. Likewise, the fiscal deficit was to be brought down to 3% of GDP by 2009-10 by paring it by 0.3% of GDP every year.
Former finance minister Palaniappan Chidambaram had already suspended the FRBM?s revenue deficit target for 2008-09 by a year. But huge spending during that financial year threw both revenue and fiscal deficit targets completely out of whack.
The new government, however, would have to wait for the 13 th Finance Commission?s recommendations on medium-term fiscal adjustments before preparing amendments to the FRBM Act. ?The 13 th Finance Commission has already been asked to prepare a new roadmap for fiscal consolidation,? said Tendulkar.
The Centre had amended the commission?s terms of reference last August to include a review of ?the roadmap for fiscal adjustments? and suggest a ?suitably revised roadmap to maintain the gains of fiscal consolidation through 2010 to 2015?.
The recommendations could come by October, and the amendments in the winter session.