{"id":31397,"date":"2018-10-27T13:25:43","date_gmt":"2018-10-27T07:55:43","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=31397"},"modified":"2018-10-27T13:25:43","modified_gmt":"2018-10-27T07:55:43","slug":"are-fiscal-risks-increasing","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/are-fiscal-risks-increasing\/","title":{"rendered":"Are fiscal risks increasing?"},"content":{"rendered":"<p><a href=\"http:\/\/www.thehindu.com\/todays-paper\/tp-opinion\/are-fiscal-risks-increasing\/article22709676.ece\"><b>Are fiscal risks increasing?<\/b><\/a><\/p>\n<p><b>Context:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\"> Budget 2018-19 has proposed amending the FRBM Act again, which will shift the target of 3% fiscal deficit-GDP ratio to end-March 2021.<\/span><\/li>\n<\/ul>\n<p><b>New framework:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The new statutory anchors relate to the general and Central government debt-GDP ratios that are to be reduced to 60% and 40% of GDP, respectively, by 2024-25, based on the recommendations of the report by the FRBM Review Committee.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\"> No target has been set for revenue deficit.<\/span><\/li>\n<\/ul>\n<p><b>Background:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">After the enactment of the Fiscal Responsibility and Budget Management (FRBM) Act in 2003 and the related FRBM Rules in 2004, the target fiscal deficit to GDP ratio of 3% for the Union government was achieved only once, in 2007-08, when it was 2.5%.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The FRBM Act was amended twice, in 2012 and 2015.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The revisions in 2015 shifted the date for achieving the 3% target to 2017-18. By this year, the amended revenue deficit target was put at 2% of GDP.<\/span><\/li>\n<\/ul>\n<p><b>Fiscal and revenue deficits relative to GDP:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The average rate or margin by which different governments have reduced the fiscal and revenue deficits relative to GDP has been quite low.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The average margin of reduction over two periods, namely 2009-10 to 2013-14 and 2014-15 to 2018-19, for fiscal deficit relative to GDP was 0.3 percentage points per year in the first period and 0.2 percentage points per year for the second period.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\"> For the Centre\u2019s debt-GDP ratio, the average reduction margin was 1.1 percentage points and 0.5 percentage points per year for the two periods, respectively.<\/span><\/li>\n<\/ul>\n<p><b>Key recommendations were not accepted:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\"> The committee had not given up on the desirability of achieving revenue account balance. It had specified a revenue deficit glide path, reaching 0.8% by 2022-23. This too was not accepted.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The Central government did not accept another recommendation of setting up a fiscal council, which could independently examine the economic case and justification for deviating from the specified targets.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\"> In the committee\u2019s recommendations, the debt-GDP levels of 60% and 40% of GDP for the general and Central governments, respectively, were to be achieved by 2022-23. These target dates have been shifted to 2024-25.<\/span><\/li>\n<\/ul>\n<p><b>Fiscal risks<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\"> \u00a0Fiscal risks may also be higher with the reliance on extra-budgetary resources for financing a number of ambitious government spending programmes.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">In the Budget for 2018-19, the total outlays for three focus areas, namely, agriculture and rural livelihoods, infrastructure and education, and health and social sectors, amount to 11.6% of GDP.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Budgetary resources constitute only 16.4% of the total outlay.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The balance, 83.6%, is to be raised as an extra-budgetary resource by the public sector enterprises concerned, special purpose vehicles and other similar institutions.<\/span><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Are fiscal risks increasing? Context: Budget 2018-19 has proposed amending the FRBM Act again, which will shift the target of 3% fiscal deficit-GDP ratio to end-March 2021. New framework: The new statutory anchors relate to the general and Central government debt-GDP ratios that are to be reduced to 60% and 40% of GDP, respectively, by&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/are-fiscal-risks-increasing\/\">Continue reading <span class=\"screen-reader-text\">Are fiscal risks increasing?<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[555],"tags":[],"class_list":["post-31397","post","type-post","status-publish","format-standard","hentry","category-test-1","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704877509},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/31397","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=31397"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/31397\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=31397"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=31397"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=31397"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}