The government is likely to dump a proposal for setting up a fiscal council, which is aimed at monitoring the government’s fiscal announcements for any given year and providing its forecasts and analysis for the same.
Additionally, any new Bill to institutionalise a future fiscal road map, or an amendment to the existing Fiscal Responsibility and Budget Management (FRBM) Bill, may happen in the next Budget session of Parliament, Business Standard has learnt.
The fiscal council was suggested by the FRBM panel
as part of its recommendations for a medium-term fiscal road map till FY23. The panel was headed by former Member of Parliament
and revenue and expenditure secretary N K Singh, and included former finance secretary Sumit Bose, Reserve Bank of India (RBI) Governor Urjit Patel, Chief Economic Advisor Arvind Subramanian, and Rathin Roy, director of the National Institute of Public Finance and Policy, as members.
It has recommended a fiscal deficit target of 2.5 per cent of gross domestic product (GDP), revenue deficit of 0.8 per cent and a combined Centre-state debt ceiling of 60 per cent for 2022-23 — the end point of its six-year medium-term fiscal road map. These recommendations are part of the draft Debt Management and Fiscal Responsibility Bill. The government is examining these recommendations.
“The fiscal management is, to a great extent, an exclusive function of the finance ministry. Any structure which is not embedded in the finance ministry, how will that be effective? We need to understand that. If you give an executive role to a fiscal council which does not have the necessary instruments, will that work? Those instruments are with the government, be it debt sanction, expenditure or revenue,” a senior official told Business Standard, when asked about the Centre’s stance on the proposed council.
Two more officials echoed the first official’s statement. All three said that careful deliberations regarding the FRBM panel’s suggestions were ongoing and no decision had been taken yet. One of the officials also indicated that a new FRBM Bill, or amendments to the existing one, would not be tabled in Parliament
before the Budget session.
The FRBM panel
had recommended the fiscal council after studying examples of 40 economies, advanced and emerging.
The council has been proposed as an autonomous body, but under the aegis of the finance ministry.
“It is proposed that it should comprise a chairperson and two members to be appointed by the central government. The persons to be appointed ought to have significant experience in public finance, economics or public affairs,” the panel had said in its report.
“We foresee the council will serve both an ex-ante role — providing independent forecasts on key macro variables like real and nominal GDP
growth, tax buoyancy, commodity prices — as well as an ex-post monitoring role, and also serve as the institution to advise on triggering the escape clause and also specify a path of return,” the report says.