FRBM panel report likely on Monday

Committee may recommend fiscal deficit target relaxation

A panel tasked with recommending a future fiscal road map, and whose recommendations are likely to be incorporated in the coming Union Budget 2017-18, might present its report to Finance Minister Arun Jaitley on Monday.

The Fiscal Responsibility and Budget Management (FRBM) committee is chaired by N K Singh, a former member of Parliament and an ex-revenue and expenditure secretary. The report was to have been originally given on October 30. That was postponed more than once, after, in turn, being told to consider some recommendations of the 14th Finance Commission, seek the opinion of the Reserve Bank and study the impact of demonetisation.

On February 1, Jaitley is expected to present a populist budget as the Narendra Modi government looks to negate the effect of a possible slowing in economic activity due to demonetisation. On the cards are sops and higher outlay for micro, small and medium enterprises, agriculture, affordable housing and a thrust for the social sector, infrastructure and job creation.

Sources believe the panel will recommend a looser deficit target for 2017-18, closer to 3.5 per cent of gross domestic product (GDP), the same as the current year and, provide a schedule of six to eight years to reach the desired level, with flexibility in between for varying of spending.The current FRBM roadmap sets the fiscal deficit target for 2017-18 at three per cent of gross domestic product. The existing law is likely to be amended or replaced with a new one, based on the panel's recommendations.

It could panel also suggest pauses in getting to the targets. The current schedule mandates consecutive reductions in the gap between total expenditure and total revenue. "A pause would mean that if the minister achieves the deficit target for any given year, he can stay at that number as a percentage of GDP for a couple of more years before reducing it further," said an official.

As reported earlier, the FRBM panel is expected to recommend certain conditions under which extra spending is necessary. These could include macroeconomic headwinds, natural disasters or in case of war.