FRBM PANEL LOOSENS FISCAL TARGETS

Suggests revenue deficit at 30% of fiscal deficit by 2023

The committee to review the Fiscal Responsibility and Budget Management (FRBM) law has recommended that the Centre’s revenue deficit be no more than 30 per cent of the fiscal deficit by the completion of its six-year road map ending 2023, Business Standard has learnt. This is markedly different from the existing road map, which envisages a complete elimination of the revenue deficit. The Union Budget’s projected revenue deficit at ~3.21 lakh crore is projected to be nearly 59 per cent of the budgeted fiscal deficit target of ~5.47 lakh crore. The revised revenue deficit target for 2016-17 of ~3.11 lakh crore will be 58 per cent of the revised fiscal deficit of ~5.34 lakh crore. ARUP ROYCHOUDHURY reports

The committee to review the Fiscal Responsibility and Budget Management (FRBM) law has recommended that the Centre’s revenue deficit be no more than 30 per cent of the fiscal deficit by the completion of its six-year road map ending 2023, this newspaper has learnt.

This is markedly different from the existing road map which envisages complete elimination of the revenue deficit.

The 2017-18 Union Budget's revenue deficit at ~3.21 lakh crore is projected to be nearly 59 per cent of the budgeted fiscal deficit target of ~5.47 lakh crore. The revised revenue deficit target for 2016-17 of ~3.11 lakh crore will be 58 per cent of the revised fiscal deficit of ~5.34 lakh crore.

Fiscal deficit is the difference between total expenditure and total revenue of the government for any given year. Revenue deficit excludes the government’s capital spending from that equation and essentially denotes how much more the Centre spends on administrative and operational expenditure than what it earns through all current receipts.

Senior sources aware of the FRBM panel’s recommendations say a zero revenue deficit is unachievable. “It is impossible, given the size of a country like India which depends so much on government schemes for the social sector and agriculture, especially in rural areas,” said an official. As reported earlier, the FRBM panel’s report, which sets a road map to achieve a fiscal deficit of 2.5 per cent of gross domestic product by 2023, could be made public before March 9, the day Parliament reconvenes for the second half of the Budget session.

Business Standard had also reported earlier that the panel has suggested setting up of a fiscal council to oversee and verify the credibility of the government’s budget numbers and fiscal targets for any year. While the political leadership is said to be comfortable with the idea, the bureaucracy is reportedly opposed.

The panel had in its report recommended a fiscal deficit target of three per cent of gross domestic product from 2017-18 to 2019-20. In his Budget speech, the finance minister said the Centre was targeting 3.2 per cent for 2017-18 but was likely to maintain three per cent in 2018-19 and 2019-20.

The committee is headed by N K Singh, a former member of Parliament and also an ex-revenue and expenditure secretary. Others are former finance secretary Sumit Bose, Reserve Bank governor Urjit Patel, chief economic advisor Arvind Subramanian, and Rathin Roy, director of the National Institute of Public Finance and Policy.