A panel that is reviewing Fiscal Responsibility and Budget Management Act (FRBM) lauded Indian Government’s move to meet demands of unavoidable expenditures.
The panel, which is headed by former Planning Commission member NK Singh, in his report to Finance Minister Arun Jaitley stated that the Centre should spend on key projects and halt on its fiscal deficit target.
The report, which will be seeded in Budget 2017, talks about spending on infrastructure, housing, social sectors, etc without compromising on overall need for fiscal consolidation.
This may give the government enough reason to spend more in the current financial year and help sectors which may have faced the brunt of the demonetisation drive.
Sources told ET the FRBM review panel is learnt to have avoided fixing the fiscal deficit at 3% of GDP by 2017-18. Amendments to the FRBM Act had pushed back the target of achieving 3% fiscal deficit to 2017-18 and the panel is understood to have pushed for a higher ceiling given the spending and stimulus need.
In his last budget, Jaitley had said implementation of FRBM Act had made significant gains.
"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," Jaitley had said in Budget 2016-17.
Meanwhile, during the review, the panel took into considerations contemporary changes, past outcomes, global economic developments, best international practices and to recommend the future fiscal framework and road map for the country.
This panel wants government not to think about fiscal deficit target and step up spending
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