Finanance Commission: N K Singh Committee for a new Fiscal Consolidation Road Map

On March 19, 2020, the Finance Commission Constituted a committee under Shri N K Singh in order to build a fiscal consolidation road map for the centre and the states.

Highlights

The Finance Commission had submitted its first report to the GoI in February 2020. The Commission will submit its final report covering the financial years 2021-22 to 2025-26 by October 30. The N K Singh committee will recommend definition of deficit and debt. It will also define contingent liabilities of the public sector undertakings.

Fiscal Consolidation

Fiscal Consolidation is the policy adopted by the Government to reduce the deficits. It mainly aims to reduce administrative costs of the Government. In simple words, the policies undertaken by the Government to reduce debt stocks and deficits.

The Fiscal Responsibility and Budget Management Act, 2003 (FRBMA) is the best example for the Fiscal Consolidation measure of GoI

FRBMA act

The act aimed to reduce fiscal deficit by 3% of GDP. It aimed to eliminate the deficit by 2006 by avoiding borrowings from RBI. However, it couldn’t be achieved due to International Financial Crisis. Later, a review committee was set up in 2016 to suggest changes of the act under N k Singh then as well.

Month: Current Affairs - March, 2020