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Thu 23rd of November 2017


IAS EXPRESS - Free Download

Hold fiscal deficit at 3% till FY20, says N.K. Singh panel
  • fiscal deficitThe 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 Fiscal Responsibility and Budget Management (FRBM) Review Committee chaired by former Revenue Secretary N.K. Singh has recommended.

  • Set up to comprehensively review and give recommendations on the FRBM roadmap for future, 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.

  • To put that in context, the government has set a fiscal deficit target of 3.2% of GDP in 2017-18, marginally better than the 3.5% clocked last year.

  • 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.

  • 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 far-reaching 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.


Prelims Question of the Day

With reference to 'Natural Rate of Unemployment', consider the following statements.

1. It is the level of unemployment in an economy that is just consistent with a stable rate of Inflation.

2. It is the unemployment that prevails when all markets in the economy are in equilibrium.


(a)1 and 2

(b)2 only

(c)1 only

(d)None of the above

Mains Question of the Day

1.GS-No party in power can afford to ignore Directive Principles of State Policy. Comment.(200 Words)

2.Political Science - Explain the role of non state actors, like IMF, World Bank, European Union and MNCs, in modulating and transforming the broad dynamics of international relations. (250 Words).

3.SOCIOLOGY - What is the impact of Globalization on the structure and mobilization of the working class in India? (250 Words).

Sociology - Thinkers