Yokohama: The finance ministry is of the view that the recommendation of the fiscal discipline panel headed by N.K. Singh to bring down debt-to-GDP (gross domestic product) ratio to 60% by 2022-23 from 67.9% in 2016-17 is feasible even though the glide path to the target may need to be altered from what is prescribed by the committee, a senior Indian bureaucrat said.
“The principal anchor of the committee’s recommendations on fiscal roadmap is debt to GDP. Our calculation shows it should be possible to reach 60% in 2023 even with the 3.2% fiscal deficit spelt out in the budget for current year and 3% for next two years. Now, within that, what should be the annual fiscal target, that has to be worked out," economic affairs secretary in the finance ministry Shaktikanta Das said on Friday, while speaking to select journalists in Yokohama at the sidelines of the Asian Development Bank’s 50th annual meeting.
The N.K. Singh panel to review India’s existing Fiscal Responsibility and Budget Management (FRBM) rules has recommended a debt-to-GDP ratio of 40% for the Central government, 20% for the state governments together and a fiscal deficit of 2.5% of GDP, both by financial year 2022-23.
The committee has prescribed a so-called glide path to these targets—steady progress towards them—and also suggested that there be some flexibility in the deficit targets on both sides, downwards when growth is good and upwards when it isn’t.
The panel has recommended enacting a new Debt and Fiscal Responsibility Act after repealing the existing Fiscal Responsibility and Budget Management (FRBM) Act, and creating a fiscal council.
In 2016-17, India’s debt-to-GDP ratio for the Central government was 49.4% and fiscal deficit at 3.5% of GDP. 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 current FRBM Act.
Asked how will the Centre ensure states also stick to the FRBM panel’s recommendation of reducing their debt-to-GDP ratio to 20% by 2022-23, Das said it could be either a meeting of the state finance ministers or state finance secretaries.
“It is to be discussed and decided between the Centre and the states which forum will be appropriate. There is an excellent spirit of cooperative federalism between the Centre and states and goods and services tax is a reflection of that. The performance of states under the current FRBM regime is exemplary. So, there is no reason why the states should not do it even in the revised FRBM regime," he said.
Das said on issues like fiscal council suggested by the FRBM panel, a decision will be taken after stakeholders’ comments are received by 5 May.
“When the comments are received, we will start the process of examination and then the government will take a very quick decision. The decision has to be taken before the next budget," he added.
On finance minister Arun Jaitley’s announcement in the budget to abolish the Foreign Investment Promotion Board (FIPB), Das said inter-ministerial consultations are over and the proposal should go shortly to the competent authority for a decision. “I would expect a decision in a matter of few weeks," he added.
Das said on proposals concerning India’s national security, no compromise will be made and the ministry concerned has to take clearance from the ministry of home affairs on the proposal.
Asked whether he is disappointed over Fitch Ratings earlier this week not upgrading India’s sovereign credit rating, Das said with all structural reforms in the last three years and India growing at a 7%-plus rate, if the rating agencies do not give an upgrade to India, then they are probably far detached from ground realities. “So it is for them to really introspect," he added.
(Asit Ranjan Mishra is in Yokohama at the invitation of the ADB to cover its 50th annual meeting.)