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After helping the Reserve Bank of India scrutinise bids to enter the private banking space, its former chief, Bimal Jalan, is to now assist the government manage its expenditure and bring down subsidies.
Prime Minister Narendra Modi has approved the constitution of an Expenditure Management Commission, to be headed by Jalan. The commission will have former finance secretary Sumit Bose and former RBI deputy governor Subir Gokarn as members. The additional secretary in the department of expenditure will be an ex-officio member and a senior officer with finance or expenditure experience will be member-secretary.
The Commission is expected to give an interim report before the Budget of 2015-16 and its final report before the Budget of 2016-17. The detailed terms of reference will be notified separately.
The proposal to establish such a panel was made by Finance Minister Arun Jaitley in his maiden Budget for 2014-15. "I ...propose to overhaul the subsidy regime, including food and petroleum subsidies, and make it more targeted, while providing full protection to the marginalised, poor and scheduled castes/tribes," he'd said in his Budget speech, while proposing constitution of the Commission.
The subsidy bill on food, petroleum and fertilisers, called major subsidies, is estimated at Rs 2,51,397 crore for 2014-15, up 2.5% over the Rs 2,45,451 crore in the revised estimate for 2013-14.
Jaitley recently said in Parliament that meeting the target of reining in the Centre's fiscal deficit at 4.1% of gross domestic product (GDP) in 2014-15 was a daunting challenge but achievable. To do so, the government proposed to bring down major subsidies from 2.2% of GDP in 2013-14 (revised estimate) to 2.03% of GDP in 2014-15 (budget estimate).
"With active policy measures, reforms of the government to contain fiscal deficit and quantum of subsidy bill, it is expected that the subsidy will progressively reduce. It is proposed to keep the subsidy level at 1.7% and 1.6%t of GDP in 2015-16 and 2016-17, respectively," he'd said.
One of major tasks of the proposed Commission would be management of the subsidy bill, Jaitley had said.
