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N.K. Singh Committee

  Aug 18, 2017

N.K. Singh Committee

The N.K. Singh panel to review India’s fiscal discipline rules has recommended: In 2016-17 The government is hoping to end 2017-18 with a fiscal deficit that is 3.2% of GDP, marginally higher than the 3% mentioned in the FRBM Act.

Fiscal council
The proposed three-member fiscal council will prepare multi-year fiscal forecasts for the central and state governments (together called the general government) and provide an independent assessment of the central government’s fiscal performance and compliance with targets set under the new law.

The committee favours a: Within the framework, the committee has recommended adopting fiscal deficit as the key operational target consistent with achieving the medium-term debt ceiling, at 3% of GDP for three years, between 2017-18 and 2019-20.
Revenue deficit-to-GDP ratio has been envisaged to decline steadily by 0.25 percentage points each year from 2.3% in 2016-17 to 0.8% in 2022-23.

Escape clauses
The panel has introduced escape clause triggers that can allow 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.

Deviations
While the committee has 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 from the target.
The escape clause can also be triggered if real output growth in the economy slips by 3 percentage points from the average of the previous four quarters.

Buoyancy clause
A similar buoyancy clause has been proposed, so that fiscal deficit must fall atleast 0.5% below the target if real output grows 3% faster than the average of the last four quarters.