Moving to a new fiscal framework, the government is likely to accept most recommendations of the NK Singh committee, including the proposal for a new debt management law, fresh deficit goalposts and escape clauses for fiscal deviation.
The Finance Ministry is keen to go for a complete overhaul of the fiscal framework, including new goalposts and a revamped Debt and Fiscal Responsibility Act in place of the current Fiscal Responsibility and Debt Management Act, 2003. But, it is unlikely to be in a big hurry to set up the Fiscal Council proposed by the committee. “The Council is likely to be formally acknowledged but may be a part of the long-term goals. It may not be set up immediately as it will require more examination,” said a person familiar with the development.
The Committee, in the first volume of its report, had proposed setting up a Fiscal Council that would confer with the government on the need for any deviations from fiscal goals and also make multi-year fiscal forecasts for central and general government.
The Council, which is proposed to have a chairman and three members who are experts in public finance or economics, will be an independent agency under the Finance Ministry. Over 35 countries have such Councils.
Noting that it was the previous NDA government that had prepared the FRBM, an official said the government is still very committed to fiscal consolidation and wants to preserve India’s credibility and stability among domestic and foreign investors.
As a precursor, Finance Minister Arun Jaitley had in the Union Budget taken note of the fiscal deficit roadmap of 3 per cent recommended by the Committee for the next three years.
Sources said the government is also likely to accept the recommendation to lower the general government debt to GDP ratio to 60 per cent by 2023 and also accept the escape clauses for fiscal deviation.
Still under review
“The report is still under review by the government. There may be some modifications but the overall intention is to accept it and implement it over the years,” said a second person. The Finance Ministry has now sought comments on the report from the public, by May 5.
The FRBM Committee was set up in May 2016 to review the Centre’s fiscal roadmap. It submitted its report on January 23 and it was a key input for Union Budget 2017-18. But while announcing its key recommendations, Jaitley had said the report would be examined in detail.