Finance Commission to consider recommending a range for fiscal deficit

Given the massive disruption in the economy due to Covid-19, the 15th Finance Commission will consider a suggestion to recommend a range instead of a fixed number for fiscal deficit and debt-to-GDP ratio in its report for award period of FY22-FY26, Commission Chairman NK Singh said on Friday.

“We do recognise that giving a range both for the Centre and an equally that for the states may be more in tune with the reality than giving a fixed point due to the fact that a more certain world has moved to a somewhat more uncertain world,” Singh said after a meeting of the Commission’s advisory council. Many members of the advisory panel suggested to consider a range for the key fiscal targets similar to the one on retail inflation (4% plus/minus 2%) set by the Monetary Policy Committee.

“We need to be mindful that giving a range always have a deep inclination to only operate at the upper end of the range. But, we will be giving a mean target in case we do decide,” Singh said.

According to the FRBM mandate, the Centre’s fiscal deficit is to be 3 per cent of GDP, however, that has eluded in the past decade with resetting of target multiple times. FE