The government has announced the constitution of a panel under Former Revenue Secretary and Rajya Sabha MP N.K. Singh to review the Fiscal Responsibility and Budget Management (FRBM) Act of 2003.
The panel will also consider the possibility of replacing absolute fiscal deficit targets with a target range that may be adjusted in line with the overall credit trends in the economy.
Mr.Singh will chair the five-member review committee promised by Finance Minister Arun Jaitley in the Budget.
The ambit of the committee includes reviewing “the working of the FRBM Act over last 12 years and 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”.
The Committee is also to examine the feasibility of having a ‘fiscal deficit range’ as the target instead of the existing fixed numbers. The Committee is also tasked with examining “the need and feasibility of aligning the fiscal expansion or contraction with credit contraction or expansion respectively in the economy”.
“The moment you give any sort of leeway in terms of a fiscal deficit target band, there is always the possibility of the government diluting the target,” M. Govinda Rao, Professor Emeritus at the National Institute of Public Finance and Policy, told The Hindu.
“But linking fiscal expansion to credit expansion means they are talking about counter-cyclical measures,” Mr. Rao said.
