FRBM panel to submit report by Nov 12

Report likely to 'excuse clauses'; May suggest new law

The Fiscal Responsibility and Budget Management (FRBM) committee, which has been tasked with suggesting a future fiscal roadmap, is likely to submit its report by November 12. The panel’s report is likely to have ‘excuse clauses’, which will absolve the government of meeting its fiscal commitments for any given year under certain conditions such as war or conflict, global economic meltdowns or natural disasters.

The recommendations of the panel – headed by former member of Parliament and revenue and expenditure secretary N K Singh – could also include repealing the FRBM Act and replacing it with an updated law based on its report.

A senior official aware of the FRBM panel’s deliberations said the report was being prepared and that specific fiscal deficit targets would be recommended in the report. However, these numbers will be decided upon just days before the submission of the report.

“There will be excuse clauses which can be invoked under extraordinary circumstances,” the person said.

The FRBM panel was originally scheduled to submit its report by October 31. However, it was given additional terms of reference and told to look at the recommendations of the Fourteenth Finance Commission (FFC) related to fiscal consolidation and amendments in the FRBM Acts.

FFC’s suggestions include reporting total extended public debt by states and the Centre in their Budgets; omission of the definition of effective revenue deficit from FRBM Act; setting up independent fiscal councils to study Budget proposals; amendments by states of their FRBM Acts to provide flexibility on fiscal deficit; and replacing the FRBM Act altogether with a Debt Ceiling and Fiscal Responsibility legislation.

As reported earlier, the FRBM panel might suggest against a fiscal-deficit range and could recommend combining the Centre and states’ fiscal deficit and debt targets.

Among its existing terms of reference, it will also take a re-look 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 other members of the FRBM panel are Reserve Bank of India Governor Urjit Patel; Chief Economic Advisor Arvind Subramanian; former finance secretary Sumit Bose; and Rathin Roy, director of National Institute of Public Finance and Policy and a Business Standard columnist. Patel had initially resigned from the panel after taking over the reins of the central bank but later rejoined it after getting approval from the government.