The Union government is likely to announce new fiscal rules which will provide it with more flexibility in spending.This assumes the government accepts the recommendations of the expert panel headed by former revenue secretary N.K. Singh, which has prescribed a fiscal path—for both the centre and states—but with escape clauses that have been “quantified”. The panel, said a person familiar with the report, also desisted from specifying a range for the fiscal deficit. The panel submitted its report on Monday.“The Government will examine the FRBM (Fiscal Responsibility and Budget Management) Committee Report and take appropriate action,” a finance ministry statement said.
The key recommendations are likely to be announced in the budget, while the full report will be released later, said a government official.The panel had been mandated to explore the option of moving to a flexible fiscal deficit target instead of targeting a fixed number every year. It is not clear whether the panel has used the fiscal deficit or the revenue deficit as the metric to define the path.After deciding to stick to the fiscal deficit target of 3.5% of gross domestic product for 2016-17, finance minister Arun Jaitley in last year’s budget proposed an expert group to amend the FRBM Act.
“Given the kind of volatility that is prevailing all around, I think the world over governments need some political headroom to move the goalpost either way,” economic affairs secretary Shaktikanta Das said in an interview to Mint after last year’s budget. “The government should have some policy space and at the same time the band for policy adjustment should not be so large that it defeats the purpose of fiscal consolidation.”Madan Sabnavis, chief economist at Care Ratings Ltd, said the government suggestion of putting in place a fiscal deficit band was pragmatic. “Government needs to maintain growth momentum for which it should have a flexible fiscal deficit target. However, this year, with enough revenue gains, it need not deviate from the current fiscal consolidation roadmap