N.K. Singh panel submits report on FRBM Act

A committee constituted by the government last year to set a new fiscal consolidation roadmap has submitted its report. The panel has submitted its report on revising the Fiscal Responsibility and Budget Management Act to the finance minister.

Background:

The five-member committee was constituted in May 2016 following Mr. Jaitley’s announcement, in Budget 2016-17, of the creation of a panel to review the Fiscal Responsibility and Budget Management Act.

The government had mandated the committee to explore whether it should adopt a flexible fiscal deficit target instead of a fixed number every year.

Highlights of the report:

• The committee has recommended major changes in the 13-year-old Fiscal Responsibility and Budget Management (FRBM) Act and suggested ways to ensure responsible and higher growth, sources said.
• The committee says, “a new FRBM Act is critical to create better conditions for co-ordination between monetary and fiscal policy and also usher in a low interest rate regime.”
• There is also a suggestion that fiscal expansion or contraction should be aligned with credit contraction or expansion respectively in the economy.

FRBM act:

The Fiscal Responsibility and Budget Management Act, 2003 (FRBMA) is an Act of the Parliament of India to institutionalize financial discipline, reduce India’s fiscal deficit, improve macroeconomic management and the overall management of the public funds by moving towards a balanced budget.

 
Need for review of FRBM act:

Since its introduction, the Fiscal Responsibility and Budget Management Act has been facing a rocky road in terms of implementation. Paused four times since its enactment in August 2003, including for a reset of the fiscal deficit target in 2008-09 following the global financial crisis, the FRBM Act has become a subject of animated debate.

Source

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