Fiscal council likely to be set up

The Centre might accept a recommendation of the fiscal responsibility and budget management (FRBM) panel for the formation of a fiscal council.

The FRBM panel has suggested the fiscal council be a semi-independent body monitoring the government’s fiscal announcements, providing its own forecasts and analysis and advising the Centre on deviating from the fiscal path under certain circumstances.

The FRBM panel had also made several other recommendations, some of them, contentious, decisions on which are yet to be taken.

The FRBM panel had said: “We foresee the council will serve both an ex-ante role —providing independent forecasts on key macro variables like real and nominal gross domestic product (GDP)  growth, tax buoyancy, commodity prices — as well as an ex-post monitoring role, and also serve as an institution to advise on triggering the escape clause and also specify a path of return.”

Officials aware of the developments told Business Standard the new debt management and fiscal responsibility Bill, which will replace the existing FRBM Act, would most likely contain the proposal to set up a fiscal council. The final shape of this body and its mandate is still being deliberated upon.

In a related development, senior finance ministry officials on Wednesday briefed the Prime Minister’s Office on the FRBM panel’s proposals and on the proposal to shift to a January-December financial year. Sources said these briefings were held to apprise the PMO of the proposals. The PMO has reserved its views on the issues for now.

The FRBM panel had recommended a fiscal council after studying 40 advanced and emerging economies. It proposed an autonomous fiscal council under the aegis of the finance ministry. 

“It is proposed that it should comprise a chairperson and two members to be appointed by the central government. The persons to be appointed ought to have significant experience in public finance, economics or public affairs.”

The panel had recommended a fiscal deficit target of 2.5 per cent of GDP, revenue deficit of 0.8 per cent and a combined Centre-state debt ceiling of 60 per cent for 2022-23, the end of its six-year medium-term fiscal road map.