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Fiscal consolidation: States lack the flexibility that the Centre enjoys

While the Centre has an escape clause to deviate from the fiscal consolidation road map by 0.5 percentage point of GDP in times of exigency, states were not given any such escape clause

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The issue of lack of symmetry between the Centre and states in fiscal consolidation was also raised by 15th Finance Commission Chairman N K Singh recently. Illustration: Binay Sinha

Indivjal Dhasmana Ndew Delhi

6 min read Last Updated : Mar 17 2021 | 5:09 PM IST

While the Centre has relaxed its fiscal deficit target for the current financial year to 9.5 per cent of India’s gross domestic product (GDP), much higher than the escape clause allowed by the previous Fiscal Responsibility And Budget Management (FRBM) Act, states got the Centre’s approval to increase it to five per cent of their respective gross state domestic product (GSDP) from the targeted three per cent, subject to some riders.

While the Centre was given an escape clause to deviate from the fiscal consolidation road map by 0.5 percentage point of GDP in times of exigency, states were

Topics : Fiscal Deficit FRBM Act Indian Economy Fiscal consolidation States budget

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