Proposed panel to review FRBM act: Consultation with states done, Cabinet note soon

The government wants to co-opt the states in the process of fixing the fiscal deficit target, Watal said.

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“I have offered to, some of them (states) were enthusiastic, if somehow we can co-opt them in the process. The co-option is to understand the challenges and requirements, and then the FRBM committee can come out with new rules of game,” Watal said. The new FRBM framework needs to work out the modalities regarding debt-GDP ratios and their implications for the debt flow dynamics not only for the Centre, but also state-wise, the finance secretary said. He also expressed the desire to create a framework for counter-cyclical fiscal policy, for which national accounts framework also needs to be revamped at the state-level.

While presenting the Budget for 2016-17, though finance minister Arun Jaitley had stuck to the fiscal consolidation roadmap, he had announced setting up of a committee to review the FRBM Act. “A time has come to review the working of the FRBM Act, especially in the context of the uncertainty and volatility which have become the new norms of global economy,” Jaitley had said. The proposed panel will look into whether fiscal expansion or contraction should be aligned with credit contraction or expansion in the economy.