GOVT SET TO REVISE FISCAL FRAMEWORK BY YEAREND

NEW DELHI: India will revise its framework for fiscal discipline later this year, seeking to rein in its high public debt and to lower its fiscal deficit, broadly based on the road map that a high level panel headed by former revenue secretary NK Singh recommended in January.

A finance ministry official who spoke on condition of anonymity said the new framework for debt and fiscal deficit will feed into the annual budget for 2018-19.

Not only does it formalise fiscal responsibility, making the task of inflation management that much easier for the Reserve Bank of India, it is a confidence building measure with respect to foreign investors and rating agencies.

A Debt and Fiscal Responsibility Act proposed by the Singh panel calls for making total debt instead of the fiscal deficit the metric for fiscal prudence. The panel favoured curtailing the Centre’s debt at 38.7% of gross domestic product by 2022-23, down from 49.4% in 2016-17.

This is a departure from the current Fiscal Responsibility and Budget Management (FRBM) Act that focuses mostly on limiting the fiscal deficit. The regime proposed by the panel also include cutting the fiscal deficit to 2.5% of GDP over the same period, from 3.5% in 2016-17.

“Very soon we will take a decision on this (FRBM Act). We will follow calibrated measures to bring down fiscal deficit, which will also impact the level of public debt, which is still higher,” said the official cited above.

“We are waiting to get a sense of revenue trends post-GST rollout,” said another government official, who also asked not to be named.