As a step further to its Budget announcement of review of the Fiscal Responsibility and Budget Management (FRBM) Act, the government will form a committee within next one month to look into the merits of a range for fiscal deficit target as against the current practice of a fixed number.
“Considering the fact that FRBM is under implementation for last 10 years, the time has come to review FRBM law. The finance minister has decided to form a committee and it will be constituted within a month or so,” Economic Affairs Secretary Shaktikanta Das said at an Assocham event on Wednesday. In his Budget speech for 2016-17, finance minister Arun Jaitley had outlined the need to review working of the FRBM Act, while retaining the fiscal deficit target at 3.5 per cent of the gross domestic product for next financial year and 3.9 per cent of the GDP for this financial year.
“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. There is also a suggestion that fiscal expansion or contraction should be aligned with credit contraction or expansion respectively, in the economy. While remaining committed to fiscal prudence and consolidation, a time has come to review the working of the Fiscal Responsibility and Budget Management Act, especially in the context of the uncertainty and volatility which have become the new norms of global economy,” Jaitley had said.
On India’s growth rate, Das said, the idea is to go beyond 7.6 per cent growth, reach 8 per cent growth and then cross 8 per cent in the years to come. He said the government while taking a call about fiscal deficit has to consider managing government expenses beyond its resources, while taking care of not crowding out private sector.
“The bigger issue is how much of the (market) borrowing sustainability the government has and how much of the borrowing space the government should occupy in the market because if the government mops up all these resources, then nothing is left for the private sector,” he said. On Goods and Services Tax (GST) Bill, the Economic Affairs Secretary said, the government is awaiting passage in Parliament and the Ministry of Finance is administratively ready to implement the comprehensive indirect tax law. “We hope that it is passed in the current session of Parliament,” he said.