No plan to set up Fiscal Council, current set-up suffices: FinMin

The FRBM panel, which submitted its report in January 2017, had suggested the Council to be an autonomous body that would report to Parliament.

The finance ministry has turned down a key suggestion of the NK Singh-led Fiscal Responsibility and Budget Management (FRBM) Committee to set up an independent Fiscal Council consisting of experts to assess and advise on the government’s spending and fiscal policies.

It said it had no plan to form such a panel, in a written reply in Parliament.

“Institutions such as the Comptroller and Auditor General of India, the National Statistical Commission, Finance Commission, etc. perform some or all of the roles proposed by the FRBM Review Committee to the Fiscal Council,” minister of state for finance Pankaj Chaudhary told Lok Sabha on Monday giving the reasons for not accepting the FRBM panel’s recommendation.

The FRBM panel, which submitted its report in January 2017, had suggested the Council to be an autonomous body that would report to Parliament. The Fifteenth Finance Commission (also headed by Singh), the Fourteenth Finance Commission and the Thirteenth Finance Commission had also recommended creation of such a body.

“In India, despite the recommendations of successive Finance Commissions and other bodies to go in this direction, progress has lagged. As a result, institutional gaps have persisted in the production, collation, coordination and publication of fiscal data, as well as in independently reviewing fiscal projections and the medium-term budgetary framework across levels of government,” the Fifteenth Finance Commission said in its report in October 2020.

The FRBM panel had suggested the Centre should aim for a fiscal deficit of 3% of the GDP for three straight years starting from FY18 and gradually reduce it to 2.5% by FY23 and partner states in adhering to fiscal discipline.

The Centre’s fiscal deficit which widened to a very high level of 9.2% of GDP in FY21 due to Covid-related additional spending and revenue crunch. The Centre’s fiscal deficit for FY22 is budgeted at 6.8% of GDP, a level much above the FRBM threshold.

The announced plan is to reduce the deficit to below 4.5% of GDP by FY26. The Budget play give clarity on how and when the FRBM-mandated level of 3% fiscal deficit will be achieved.

The FRBM panel had suggested a ceiling for general government debt (both centre and states) of 60% of GDP by FY23. And within this overall limit, a ceiling of 40% should be adopted for the Centre, and 20% for the states. While the centre’s debt-to-GDP ratio rose to 58.8% in FY21 (from 49.4% in FY17), states’ stood at 30.8%.

The FRBM report kept debt, along with fiscal deficit, at the centre of fiscal management principles, slightly moving away from the current practice of targeting only fiscal deficit.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express Telegram Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.