Finance minister Yashwant Sinha today said the government was determined to go ahead with the passage of the Fiscal Responsibility and Budget Management Bill through Parliament, even though the standing committee on finance had recommended a totally watered down version with as many as five dissent notes from MPs.
Speaking to reporters this evening, Sinha said: "I will say the report has eliminated the responsibility (of fiscal discipline) from the bill".
The committee's report submitted in Parliament today has asked for eliminating all the ceilings on fiscal and revenue deficit as well as the ban on government borrowings from the RBI proposed in the original bill by the government.
The dissent notes have brought out the sharply divergent thinking on the issue of government finances. Ruling party MPs are of the view that the government should be allowed to achieve the goals of deficit reduction. The Left MPs have repeated their oft quoted position that reduction in fiscal deficit would harm public investment and was influenced by IMF-World Bank diktat.
The report of the committee chaired by Shivraj Patil, deputy Congress leader in Lok Sabha, has said: "The numerical ceilings and the timeframe prescribed for the revenue and fiscal deficits do not seem to be pragmatic and induce excessive rigidity into decision making". It termed the exemption provided to the government to exceed the levels only in cases of national security and calamity as too restrictive.
The committee has justified its stance on the ground that planned deficit financing per se is not harmful to the economy. Accordingly, it has recommended substituting the yearly 0.5 per cent drop in fiscal and revenue deficit levels by "pre specified levels". It has argued that such a course is necessary to ensure that the Centre is not dragged to court whenever there is a deviation from the budgeted targets.
In their dissent notes, ruling party MPs Kharabela Swain and Kirit Somaiya have said that the finance ministry and the RBI had agreed that without the numerical limits the bill "will lose its mooring".
