Urjit Patel quits FRBM review panel, no plans for replacement: Sources

The panel is to suggest any changes required in the FRBM Act and recommend India's future fiscal road map

Urjit Patel, the Reserve Bank of India (RBI) governor-designate, has resigned from a high-profile committee tasked with reviewing the Fiscal Responsibility and Budget Management (FRBM) Act, according to sources.

The committee, headed by former member of Parliament and revenue and expenditure secretary N K Singh, will continue without looking for a replacement for Patel. Most of the deliberations with stakeholders have been completed. Also, the committee has already started work on drafting its report, Business Standard has learnt.

The panel, set up in May, is to suggest any changes required in the FRBM Act and recommend India’s future fiscal road map.

Its terms of reference include examining the need and feasibility of having a ‘fiscal-deficit range’ in place of fixed numbers as percentage of gross domestic product.

The panel has reviewed the working of the FRBM Act over the past 12 years and will 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 is also to 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 might recommend combining the fiscal deficit and debt targets of the Centre and the states to get a better picture of India’s fiscal health. Apart from Singh and Patel, the five-member panel includes Chief Economic Advisor Arvind Subramanian, National Institute of Public Finance and Policy Director and Business Standard Rathin Roy, former finance secretary Sumit Bose.

Over the past few months, the panel has had meetings with multiple stakeholders including various central government departments, states, economists, rating agencies, multilateral agencies, top regulators including the outgoing RBI governor Raghuram Rajan, and budget-makers, among others.

With these meetings nearing completion, the panel has started drafting the report to be submitted by October 31. Hence, a decision has been taken to continue without the remaining members.
PLANNING THE FUTURE

• The five-member panel was set up in May
   
• It will suggest any changes required in the FRBM Act and recommend India’s future fiscal road map
   
• Might recommend combining the fiscal deficit and debt targets of the Centre and states
   
• It has started drafting the report, to be submitted by October 31
   
• There are no rules prohibiting Urjit Patel from continuing to be a part of the panel
   
• But, it was felt the RBI governor designate recommending India’s future fiscal road map might not be prudent