Q.11 Briefly discuss the Government’s stand on the advices of the FRBM Act review committee which submitted its report recently.

Ans. Government’s follow-up of the FRBM Act has given mixed results— results being better as well as worse as per the mandate. Based on the past experience Government called for a review in the mandate of the act, keeping in mind two important concerns—

(i) The target of fiscal deficit should be taken as ‘range’ in place of ‘number’—which can provide enough flexibility to the Government expenditure; and

(ii) ‘Fiscal expansion or contraction’ should be linked to ‘credit expansion and contraction’.

Accordingly, a five-member committee (headed by the former Revenue Secretary, N. K. Singh) was set up by the Government which submitted its report by late January 2017. As per the Government, the report will be carefully examined and appropriate decisions will be taken on its advices in due course. Though the report of the committee is not in the public domain, some of its major parts were shared by the Union Budget 2017–18, which are

as given below:

• It has done an elaborate exercise and has recommended that a sustainable debt path must be the principal macro-economic anchor of our fiscal policy.

• It has favoured Debt to GDP of 60 per cent for the General Government by 2023— consisting of 40 per cent for Central Government and 20 per cent for State Governments.

• Within the framework of debt to GDP ratio, it has derived and recommended 3 per cent fiscal deficit for the next three years.

• It has also provided for Escape Clauses, for deviations upto 0.5 per cent of GDP, from the stipulated fiscal deficit target. Among the triggers for taking recourse to these Escape Clauses, the committee has included “far-reaching structural reforms in the economy with unanticipated fiscal implications” as one of the factors.

Meanwhile, the current budget has aimed to stick to the conventional wisdom of controlling fiscal targets, as prescribed by the existing FRBM Act.