FRBM panel discusses terms of reference

The committee tasked with reviewing the Fiscal Responsibility and Budget Management (FRBM) Act had its first meeting on Saturday. The members also met Finance Minister Arun Jaitley to discuss the panel's future plans.

The five-member panel is led by former member of Parliament and revenue and expenditure secretary N K Singh. The other members are Reserve Bank of India Deputy Governor Urjit Patel, Chief Economic Advisor Arvind Subramanian, former finance secretary Sumit Bose, and Rathin Roy, the director of National Institute of Public Finance and Policy and a Business Standard columnist.

It is learnt that the members of the panel discussed the terms of reference and the scope and flexibility provided to them under those terms. These include examining the need and feasibility of having a "fiscal-deficit range" as targets in place of existing fixed numbers as percentages of gross domestic product.

The panel will review the working of the FRBM Act over the last 12 years and suggest the path forward, keeping in mind the broad objective of fiscal consolidation and the changes required in the backdrop of global volatility and uncertainty.

It will also take a relook at various aspects, factors and considerations for determining FRBM targets, and will examine the feasibility of aligning fiscal expansion or contraction with credit expansion and contraction.

The panel will also examine and give recommendations on any other aspect, which is considered relevant in relation to the determination and implementation of the FRBM road map. It may be entrusted with additional terms of reference, if considered necessary and will submit its report to the government by 31 October, 2016. The panel can also consult other government departments and outside experts during the course of its work.

It is these terms that the members discussed with the FM at his official residence. The members also discussed when to have their upcoming meetings where their actual examination of the existing FRBM norms and its future applications is expected to begin. A date has not been confirmed as one of the members is expected to be out of the country for a few weeks.

The genesis of this committee can be traced back to Jaitley's 2016-17 budget speech on February 29.

"While remaining committed to fiscal prudence and consolidation, 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. I, therefore, propose to constitute a committee to review the implementation of the FRBM Act and give its recommendations on the way forward," Jaitley had said.

As reported by the Business Standard earlier, the panel may look at a number of indicators and trends during the course of its deliberations, including the global macroeconomic situation and global growth forecasts, the government's debt situation, India's debt market, household savings and consumption, lending activity of the banks, the Centre and states' expected spending commitments and projections on India's tax-GDP ratio over the next four-five years.