A new Act may be formulated to keep the debt burden under check

New Delhi: The 14-year-old Fiscal Responsibility and Budget Management Act which was enforced to maintain financial discipline may appear in a new Avtar soon.

This possibility appears in sight as an expert committee set up by Union finance minister Arun Jaitley has suggested repeal of the Act for which rules were framed in the year 2004. The committee headed by retired bureaucrat and former Rajya Sabha member N K singh has also suggested a name for the new Act .

It may be called Debt and Financial Responsibility Act as it will deal with debt burden and will act as a guide for the purpose.

The committee which had Reserve Bank of India Urjit Patel as a member has submitted its four-volume report to the government recently. According to the report, the debt should be targeted at 60 per cent of the Gross Domestic Product or GDP by the year 2023.

The states should account for 20 per cent of the total debt and the Centre for the rest . The revenue deficit should be reduced to 2.5 per cent of GDP and fiscal deficit to zero point eight per cent. It has given a roadmap to achieve the target.

Some of members of the committee had doubted that this figure can be reached in next six years and this included Patel but the majority view which prevailed was different.

The present Act had asked the government at the Centre to reduce the fiscal deficit to three per cent by the year 2018-19.

In the light of the past experiences even 2.5 per cent target to be achieved by 2023 appears unrealistic.

For, the 2003 Act had asked the government to reduce fiscal deficit to three per cent at the end of fifth year. The year was extended to 2012 and to 2018 subsequently. But the percentage is just below four at present after fourteen years of implementation of the Act.

The Act has been amended several times to revise the year to achieve the target. It was done by amending the Finance Act. The new Act may meet the same fate if there is no change in the government action and populist measures continue to be taken.

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