Independent Public Debt Office Mooted

The committee on capital account convertibility (CAC) has recommended that the government set up its own public debt office in order to bring in greater transparency in fiscal accounting before making the rupee fully convertible. Recom-mending the fiscal accounting model adopted by New Zealand, the committee further adds that the RBI should not influence and administer the governments borrowing programme.

The RBI will also have to distinguish its role in monetary management with that of debt management by the government. The committee, in its report submitted to the RBI, observes that monetary management is often clouded by the RBIs concern about the centres borrowing programme.

 

Hence, the committee has mooted steps that should be initiated to separate the debt management policy from monetary management. This means that the government should set up its own public debt office and not avail the services of its bank. Further, it says the RBI should totally abstain from participating in the primary issues of government borrowing.

These measures would enforce better fiscal management over the long term and also enable vastly improved monetary management which will be necessary in the context of CAC.

The Committee also recommends transparent and internationally comparable procedures for fiscal accounting which do not blur the true magnitude of the GFD/GDP ratio as also the constituents of the budget as a whole.

The Indian government should take a cue from the financial management regime adopted by the New Zealand under the Fiscal Responsibility Act. It has produced major advances in transparency and accountability of fiscal policy decisions.

The Act specifies that information and policy documents should be made public and establishes statutory accountability for the government for fulfilling these requirements. That apart, it specifies principles of sound fiscal policy with the intention that any fiscal strategy proposed by the government can be assessed in relation to these criteria through the information provided.

It also provides for more open budgetary processes. The Committee has strongly recommended that the Indian government consider an early introduction of a system of fiscal transparency on the lines of the New Zealand system.