Fiscal Responsibility Bill Set To Lose Sting

In a major dilution of the Fiscal Responsibility and Budget Management Bill, the standing committee on finance today recommended scrapping three of its key provisions.

While the target of annual reduction in fiscal deficit by 0.5 per cent of the gross domestic product (GDP) and the timeframe for bringing it down to 2 per cent by 2005-06 have been done away with, the committee has also eliminated the clause restraining the Reserve Bank of India from subscribing to government securities from April 1, 2004.

The Bill was referred to the standing committee after it was introduced in Parliament by finance minister Yashwant Sinha in December 2000. The committee has also withdrawn the five year time limit for wiping out the revenue deficit.

The standing committee, chaired by Congress MP Shivraj Patil, felt that such close monitoring of the fisc will leave the government with little flexibility in managing the economy. It has hence introduced a clause protecting the government from being hauled up in the Court. The recommendations will be placed before Parliament.

Interestingly, several ruling party members of Parliament (MPs) stayed away from today