‘A clear glide path’ for fiscal expansion
February 01, 2021
FRBM Act to be amended; to allow expansion in deficit
The government will amend the Fiscal Responsibilty and Budget Management Act (FRBM), keeping in mind the new fiscal framework and fiscal deficit targets as proposed by the 15th Finance Commission. For FY20-21, the government has reworked the deficit target to 9.5 per cent of GDP and 6.8 per cent of GDP for the next fiscal,.
The Finance Ministry has said that it has given ‘in-principal’ approval to the recommendation given by the Commission for borrowing by the States. The Commission recommended that the proposed normal limit for net borrowings of State governments be fixed at 4 per cent of GSDP in 2021-22, 3.5 per cent in 2022- 23 and maintained at 3 per cent of GSDP from 2023-24 to 2025-26. The Commission has also recommended an extra annual borrowing space for the States, of 0.50 per cent of their GSDP for 2021-22 to 2024-25, based on performance criteria in the power sector.