Deficit limit may be tinkered

FRBM review committee to recommend a range of 3-3.5% as target

The government may tamper with the fiscal deficit target for FY18 to give a populist budget on February 1, postdemonetisation of `500 and `1,000 notes.

The Centre is expected to increase public spending in the budget as private investment is still not picking up to aid the economic recovery post-demonetisation. It is also likely to announce tax incentives including more tax concessions for housing loans in the forthcoming Budget to leave more money in the hands of the people and help the realty sector hit hard by demonetisation.

It is expected that FRBM Review Committee may recommend that Centre should focus on a range of 3 to 3.5 per cent for fiscal deficit allowing the government to overshoot the target in FY18.

For FY 18, the fiscal deficit target was supposed to be 3 per cent but it may choose the upper band of 3.5 percent in the Union Budget.

FRBM Review Committee is likely to give its recommendation soon and it may be part of the budget documents.

The committee had been studying the impact of the demonetisation so there has been a delay in submitting its report.

In the last Budget, there was a huge debate whether the government should stick to the fiscal deficit consolidation road map.

However, finance minister had chosen to stick to the roadmap and announced a fiscal deficit target of 3.5 percent for 2016-17. But he had announced a review in the working of the FRBM Act.

During the last Budget he had said: “While remaining committed to fiscal prudence and consolidation, a time has come to review the working of the FRBM Act, especially in the context of the uncertainty and volatility which have become the new norms of global economy.”

CENTRE IN May 2016 constituted a five-member committee to comprehensively review and give recommendations on the FRBM roadmap for the future.