Notes - Notes on clauses - Fiscal Responsibility and Budget Management - Finance Bill, 2012

Fiscal Responsibility and Budget Management Chapter VI (containing clauses 146-150) provides for amendments in the Fiscal Responsibility and Budget Management Act, 2003. Clause 146 seeks to amend section 2 of the aforesaid Act so as to insert the new clauses (aa) and (bb) defining the expressions of effective revenue deficit and grants for creation of capital assets . Clause 147 seeks to amend section 3 of the aforesaid Act relating to fiscal policy statements to be laid before Parliament. It is proposed to amend sub-section (1) of the said section so as to insert a new clause (d) relating to the Medium-term Expenditure Framework Statement which is also a statement of fiscal policy in addition to the statements of the fiscal policy specified therein. It further seeks to insert new sub-sections (1A) and (1B) in the aforesaid section so as to provide that the statements referred to in clauses (a) to (c) of sub-section (1) shall be followed up with the Medium-term Expenditure Framework Statement with detailed analysis of underlying assumptions. The proposed new sub-section (1B) provides that the Central Government shall lay the Medium-term Expenditure Framework Statement referred to in clause (d) of sub-section (1) before both Houses of Parliament, immediately following the Session of Parliament in which the policy statements referred to in clauses (a) to (c) were laid under sub-section (1). It also seeks to insert a new sub-section (6A) in the aforesaid section so as to provide that (a) the Medium-term Expenditure Framework Statement shall set forth a three-year rolling target for prescribed expenditure indicators with specification of underlying assumptions and risk involved; (b) the Medium-term Expenditure Framework Statement shall, inter alia, contain the expenditure commitment of major policy changes involving new service, new instruments of service, new schemes and programmes; the explicit contingent liabilities, which are in the form of stipulated annuity payments over a multi-year time-frame; and the detailed breakup of grants for creation of capital assets. It also seeks to amend sub-section (7) of the aforesaid section so as to include the Medium-term Expenditure Framework Statement in the said sub-section for the purpose of prescribing the form with respect to the said Statement. Clause 148 seeks to amend section 4 of the aforesaid Act relating to fiscal management principles. The existing provisions of sub-section (1) of the aforesaid section provide that the Central Government shall take appropriate measures to reduce the fiscal deficit and revenue deficit so as to eliminate revenue deficit by the 31st March, 2009 and thereafter build up adequate revenue surplus. Sub-section (2), inter alia, provides that the Central Government shall, by rules made by it, specify the annual targets for reduction of fiscal deficit and revenue deficit during the period beginning with the commencement of this Act and ending on 31 st March, 2009.It is proposed to amend the aforesaid sub-section (1) so as to provide that the Central Government shall take appropriate measures to reduce the fiscal deficit, revenue deficit and effective revenue deficit to eliminate the effective revenue deficit by the 31st March, 2015 and thereafter build up adequate effective revenue surplus and also to reach revenue deficit of not more than two per cent. of Gross Domestic Product by the 31 st March, 2015 and thereafter as may be prescribed by rules made by the Central Government. It further seeks to amend the aforesaid sub-section (2) so as to include therein the expression effective revenue deficit and enhance the existing time period from 31st March, 2009 to 31st March, 2015. Clause 149 seeks to insert a new section 7A in the aforesaid Act relating to laying of review report before Parliament. It provides that the Central Government may entrust the Comptroller and Auditor-General of India to review periodically as required, the compliance of the provisions of this Act and such reviews shall be laid on the table of both Houses of Parliament. Clause 150 seeks to amend sub-section (2) of section 8 of the aforesaid Act relating to power to make rules. It proposes to make certain amendments which are consequential in nature. This clause will take effect from the date on which this Bill receives the assent of the President.