1. Panel appointed to review FRBM

Panel appointed to review FRBM

The government-appointed five-member committee will be headed by former expenditure secretary N K Singh

By: | New Delhi | Published: May 18, 2016 7:29 AM

The government on Tuesday appointed a five-member committee headed by former expenditure secretary N K Singh to review the 12-year-old Fiscal Responsibility and Budget Management (FRBM) Act and to suggest whether the Centre should fix fiscal deficit target in a fixed band rather as fixed numbers from FY18 onwards.

The other members of the committee are former finance secretary Sumit Bose, chief economic adviser Arvind Subramanian, RBI deputy governor Urijit Patel and NIPFP director Rathin Roy. It will submit its report by October 31.

Announcing the plan to set up a panel to review the FRBM Act in the budget on February 29, finance minister Arun Jaitley had said: “There is now 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.”

In other words, in a good year, the deficit could be lower than FRBM -mandated 3% of GDP while in a difficult year, it could be a little higher than 3% within a range.

The Act has been credited for the improvement in the fiscal health of both the Centre and states since it came into being 2003. The government has projected fiscal deficit to decline to 3.5% in FY17 from 3.9% in FY16.

“The committee will make its assessment and provide its view on the expected impact of its recommendations on the general government deficit and other FRBM parameters,” the finance ministry said in an order.

The panel will keep 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, according to its terms of reference (ToR).

Further, it will examine the feasibility and need of aligning ‘fiscal expansion or contraction’ with ‘credit contraction or expansion’ in the economy, it said.

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