Chief economic advisor submits dissent note on FRBM panel report

NEW DELHI: Chief economic advisor Arvind Subramanian has submitted a strong dissent note on the report of the FRBM panel, disagreeing with its key constituents saying that "the new architecture would be a corset on fiscal policy, resulting in extreme procyclicality, aggravating booms and busts – with adverse effects on the economy".

"Finally, the trigger for invoking the escape clause is so demanding that it would fail to provide enough flexibility during severe downturns and enough discipline during growth booms," said Subramanian.

He has proposed a steady glide path that eliminates the general government primary deficit within five years. This, he said, would ensure a declining debt trajectory, which would reassure investors and ensure that India’s debt remains sustainable even when its debt dynamics turn less favourable in medium term.

He said the escape clause should have a more reasonable growth trigger that allows for some relaxation of the deficit targets during recessions, and some tightening of these targets during booms.