Plan panel for easing FRBM requirements

NEW DELHI: The Planning Commission has suggested a mild relaxation in the Fiscal Responsibility & Budget Management (FRBM) requirement for FY07 to meet the resource gap, even as the finance ministry is insisting on limiting the fiscal deficit target at 3.8% of the GDP.

The Commission has suggested that the fiscal deficit target in the Budget ‘06-07 should be raised to 4% of the GDP to narrow the gap between Gross Budgetary Support (GBS) requirement and identified resources.

According to government sources, the finance ministry has indicated that it could generate resources of Rs 1,57,000 crore only. The finance ministry’s calculation is guided by its aim to achieve 3.8% fiscal deficit to GDP ratio as per the time path mentioned in the FRBM Act.

According to the Commission, a marginal increase in fiscal deficit target in ‘06-07 would help the government to narrow the gap between GBS requirement and resources by Rs 8,000 crore to Rs 9,000 crore.

The Commission argues that even if the fiscal deficit target is changed from 3.8% of the GDP to 4%, there will be a 0.3% reduction in fiscal deficit compared with the indicated 4.3% in the Budget estimate of ’05-06.

The Commission is insisting that the GBS requirement for ’06-07 cannot be revised downward anymore from Rs 1,79,000 crore as any further reduction would be cutting financial allocations to the existing and proposed flagship programmes such as Sarva Shiksha Abhiyan (SSA), Mid-day Meal Scheme and NURM.