N. K. Singh Committee

Background and evolution

India adopted the Fiscal Responsibility and Budget Management Act in 2003, following the Kelkar Task Force's work on fiscal reform. It aimed to eliminate the revenue deficit and bring the Centre's fiscal deficit down to 3% of GDP. However, targets were repeatedly postponed, especially after the 2008 global financial crisis, when the Act was effectively suspended to allow stimulus spending.

In the 2016–17 Budget, the government announced a committee to review the FRBM framework in the light of uncertain global conditions and the need for flexibility. The committee was chaired by N. K. Singh, a former Revenue Secretary and Rajya Sabha member, and included the Chief Economic Adviser, Arvind Subramanian, and the RBI's Deputy Governor (later Governor) Urjit Patel, among others. Singh later chaired the Fifteenth Finance Commission.

Key features and provisions

• Debt anchor: general government debt of 60% of GDP by 2023, with 40% for the Centre and 20% for states.
• Operational target: the fiscal deficit, to be brought down to 3% of GDP for the Centre by 2019–20 or later, with a glide path.
• Revenue deficit: steadily reduced, reaching 0.8% of GDP by 2023.
• Escape clause: deviation of up to 0.5% of GDP in case of national security, war, national calamity, collapse of agriculture, or structural reforms with fiscal implications, on the advice of the Fiscal Council.
• Buoyancy clause: if real output growth exceeds the four-quarter average by 3 percentage points, the deficit must fall by at least 0.5% of GDP.
• Fiscal Council: an independent body of three members to prepare multi-year forecasts, advise on deviations and assess compliance.
• New law: replace the FRBM Act with a Debt Management and Fiscal Responsibility Act.
• Dissent: Arvind Subramanian expressed a note of dissent, questioning the use of debt as a primary anchor and preferring the fiscal deficit.