Range for Fiscal Deficit Target Rather than Number: 15th Finance Commission Panel’s Suggestion for Centre, States

“Looking at the uncertainties, I felt that, there was merit at looking at a range than a number… Having a range will be in congruity with what you have in monetary policy with +/- 2 per cent (inflation target) and that we could, no doubt, while giving fiscal number say that the central number is this, and it will be more realistic,” Singh told reporters here.

Singh, however, said that providing a range of fiscal deficit would require amendments in the Fiscal Responsibility and Budget Management (FRBM) Act.

“It (providing a range) would mean revisiting the FRBM law which provides for giving a fixed point of fiscal deficit,” Singh said. In the 2020-21 Budget, the government had used the escape clause of 0.5 per cent relaxation provided in the FRBM Act for the last year as well as the current financial year, changing the targets for fiscal deficit to 3.8 per cent and 3.5 per cent of GDP, respectively.

However, with the Centre borrowing a record Rs 12 lakh crore from the market this fiscal, and states’ borrowing ceiling increased to 5 per cent of their GDP from 3 per cent, the general government deficit is expected to be higher than what was projected in Budget before the pandemic.