A five-member committee set up by the government to review the FRBM Act and suggest the possibility of a range of fiscal deficit target has decided to hold wide-ranging consultations with different stake holders including state governments, sectoral experts and also RBI.
“We held the first meeting (on Friday) and set the ball rolling for sector specific consultations. We have prepared inventory of stake holders. We will consult state governments and seek opinion of NACER and other institutions like NIPFP,” said former revenue secretary N K Singh who is the chairman of the FRBM review committee.
He further said Reserve Bank of India (RBI) too will present a couple of papers on fiscal position of centre and states to the committee.
The committee, Singh said, will hold next meeting in the third week of June and thereafter meet continuously with a view to present its report to the government by the deadline of October 31.
Earlier this month, the government formed a committee under Singh to review the working of the 12-year old Fiscal Responsibility and Budget Management (FRBM) Act.
The other members of the committee are former finance secretary Sumit Bose, Chief Economic Advisor Arvind Subramanian, RBI Deputy Governor Urjit Patel and NIPFP Director Rathin Roy.
The committee is required to submit its report to the government by October 31, 2016.
Among other things, the committee was asked to examine the need and feasibility of having a ‘fiscal deficit range’ as the target in place of the existing fixed numbers (percentage of GDP) as the goal.
The committee is expected to suggest the way forward “keeping in view the broad objective of fiscal consolidation and prudence and the changes required in the context of the uncertainty and volatility in the global economy”.
It will also examine the need and feasibility of aligning fiscal ‘expansion or contraction’ with ‘credit contraction or expansion’ in the economy.
While announcing the intention of the government to set up a committee to examine the FRBM Act, Finance Minister Arun Jaitley in his Budget 2016-17 speech had said “there is a school of thought which believes that instead of fixed numbers as fiscal deficit targets, it may be better to have a fiscal deficit range as the target, which would give necessary policy space to the government to deal with dynamic situations”.
The FRBM review committee is expected to settle the debate whether government could opt for higher fiscal deficit to boost economic growth.