A new fiscal committee will be set up in a day or two to help enhance the ability of the Finance Commission in presenting a fiscal roadmap for the country for the next five years from 2021-22, among other things, NK.Singh, Chairman, Fifteenth Finance Commission, said.

It may be recalled that one of the core terms of reference of the Fifteenth Finance Commission required it to recommend a roadmap for fiscal deficit, debt and finances of the general government, including the Centre and the States.

The fiscal committee will include representation from the RBI, CAG, Finance Ministry and two State-level representatives who are well versed with FRBM legislations, Singh told reporters after the sixth meeting of the Advisory Council to the Fifteenth Finance Commission here.

Singh will head the proposed fiscal committee.

The committee is expected to look into, among other things, the aspect of alignment of State level Fiscal Responsibility and Budget Management (FRBM) with that of the Centre. Currently, after the amendment to the FRBM law at the Centre in 2018, the government can invoke an escape clause to relax its fiscal deficit target by 50 basis points so long as it is able to present a credible roadmap for returning to fiscal consolidation path in the next few years. The Union Finance Minister Nirmala Sitharaman, in her recent Budget, exercised this option of ‘escape clause’ to take the fiscal deficit target to 3.8 per cent of GDP in 2019-20, from an earlier projected 3.3 per cent.

In the case of States, their FRBM legislations do not have any option of escape clause. It is for the States to now consider whether they would like to align themselves with the FRBM law of the Centre, according to Singh.

Defence and internal security

Singh also said that a Group on Defence and Internal Security has been constituted to examine whether a separate mechanism for funding of defence and internal security ought to be set up, and if so, how such a mechanism could be operationalised.

Besides Singh, who will be the Chairman of the Group, the members include the Union Home Secretary, Expenditure Secretary and Defence Secretary. There was a buzz last year that the Fifteenth Finance Commission would create a defence and internal security fund — likely to be called Rashtriya Suraksha Nidhi (RSN) — by setting aside money from gross tax revenues of the Central government. The Centre had, in July last year, indicated that it wanted the States to share the financial burden of maintaining and upgrading its security apparatus, including buying weapons from global suppliers.