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Finance ministry announces 5-member panel to review FRBM Act

The committee will review the working of the FRBM Act over the last 12 years along with examining the feasibility of having a fiscal deficit range instead of a fixed number as a percentage of gross domestic product at present.

By: ENS Economic Bureau | New Delhi |
May 18, 2016 2:07:58 am
fiscal deficit, Review panel fiscal deficit, FRBM Act, NK singh, indian economy Committee to be headed by former revenue & expenditure secretary NK Singh.

Moving ahead on its Budget announcement, the finance ministry on Tuesday announced formation of a five-member committee to review Fiscal Responsibility and Budget Management (FRBM) Act.

The committee, headed by former revenue and expenditure secretary NK Singh, will review the working of the FRBM Act over the last 12 years along with examining the feasibility of having a fiscal deficit range instead of a fixed number as a percentage of gross domestic product at present, a release from the ministry said.

The committee will also study the feasibility of aligning the fiscal expansion or contraction with credit expansion or contraction in the economy. The committee will also look into various factors, aspects, considerations going into determining the FRBM targets, the release said.

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Former finance secretary Sumit Bose, chief economic adviser Arvind Subramanian, RBI Deputy Governor Urjit Patel and NIPFP director Rathin Roy are the other members of the committee. The committee shall submit its report to the government by October 31 this year .

The committee may also be entrusted with additional terms of reference, the release said, adding that the committee may consult department/agencies of the government, experts and institutions if considered necessary.

“The committee will make its assessment and provide its views on the expected impact of its recommendations on the general government deficit and other FRBM parameters. The committee will also examine and give recommendations on any other aspect considered relevant in relation to the determination and implementation of the FRBM roadmap,” the release said.

The government had redrawn the fiscal consolidation roadmap last year and stretched the time to reach the fiscal deficit figure of 3 per cent of GDP from two years to three years. It had set the fiscal deficit target at 3.9 per cent for 2015-16, 3.5 per cent for 2016-17 and 3 per cent for 2017-18.

While presenting the Budget for 2016-17, though finance minister Arun Jaitley had stuck to the fiscal consolidation roadmap, he had announced setting up of a committee to review the FRBM Act to examine the possibility of a fiscal deficit range as the target, instead of the current practice of fixed numbers as targets.

“While remaining committed to fiscal prudence and consolidation, a time has come to review the working of the FRBM Act, especially in the context of the uncertainty and volatility which have become the new norms of global economy,” Jaitley had said, adding that the proposed committee will look into whether fiscal expansion or contraction should be aligned with credit contraction or expansion in the economy.

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