What the Panel has Recommended?:=
The Centre can take a pause on the fiscal consolidation front over the next three years by maintaining a fiscal deficit to GDP ratio of 3% till 2019-20.
The panel has advocated reaching a fiscal deficit to GDP ratio of 2.8% in 2020-21, 2.6% the subsequent year and 2.5% in 2022-23.
The FRBM law enacted in 2003 had originally envisaged attaining a fiscal deficit of 3% of GDP by 2008-09, but amendments over the years had revised the year for achieving the same target to 2017-18.
Escape clause := The panel has introduced an escape clause that allows the government to skip the fiscal deficit target for a particular year, in situations that include national security concerns, acts of war, national calamities, a collapse of the agriculture sector and farreaching structural reforms with unanticipated fiscal implications.
It recommended that deviations from the stipulated fiscal targets should not be more than 0.5%.
The Reserve Bank of India governor Urjit Patel was not in favour of such a large deviation. Mr.Patel, who was also a member of the panel along with Chief Economic Adviser Arvind Subramanian, was inclined to only permit a 0.3% deviation.
The escape clause can also be triggered if the economy’s real output growth slips by three percentage points from the average of the previous four quarters. A similar buoyancy clause has been proposed, so that fiscal deficit must fall at least 0.5% below the target if real output grows 3% faster than that average.
The panel has recommended that the existing FRBM Act and rules be scrapped and a new Debt and Fiscal Responsibility Act be adopted and proposed the creation of a Fiscal Council that the government must consult before invoking escape clauses.
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The Centre can take a pause on the fiscal consolidation front over the next three years by maintaining a fiscal deficit to GDP ratio of 3% till 2019-20.
The panel has advocated reaching a fiscal deficit to GDP ratio of 2.8% in 2020-21, 2.6% the subsequent year and 2.5% in 2022-23.
The FRBM law enacted in 2003 had originally envisaged attaining a fiscal deficit of 3% of GDP by 2008-09, but amendments over the years had revised the year for achieving the same target to 2017-18.
Escape clause := The panel has introduced an escape clause that allows the government to skip the fiscal deficit target for a particular year, in situations that include national security concerns, acts of war, national calamities, a collapse of the agriculture sector and farreaching structural reforms with unanticipated fiscal implications.
It recommended that deviations from the stipulated fiscal targets should not be more than 0.5%.
The Reserve Bank of India governor Urjit Patel was not in favour of such a large deviation. Mr.Patel, who was also a member of the panel along with Chief Economic Adviser Arvind Subramanian, was inclined to only permit a 0.3% deviation.
The escape clause can also be triggered if the economy’s real output growth slips by three percentage points from the average of the previous four quarters. A similar buoyancy clause has been proposed, so that fiscal deficit must fall at least 0.5% below the target if real output grows 3% faster than that average.
The panel has recommended that the existing FRBM Act and rules be scrapped and a new Debt and Fiscal Responsibility Act be adopted and proposed the creation of a Fiscal Council that the government must consult before invoking escape clauses.
PLEASE DO LIKE SHARE AND SUBSCRIBE !!
SHARE AS MUCH AS YOU CAN !!
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