In this section, we will deal with the issue which is of critical importance to the growth of every economy – Fiscal Discipline

Before, you know about fiscal position of the country. For a better understanding, do read our Budget Deficits Explained

Focus Areas

Fiscal Position

Fiscal Deficit: The fiscal deficit in RE 2015-16 and BE 2016-17 have been retained at 3.9% and 3.5% of GDP respectively

Revenue Deficit: Govt. has improved upon the Revenue Deficit target from 2.8% to 2.5% of GDP in RE 2015-16.

Seventh Pay Commission

Govt has constituted a committee to examine the Seventh Pay Commission Report and give its recommendations.

Follow our story on Seventh Pay Commission here.

Rationalisation of Central Schemes

• Govt has rationalised and restructured more than 1500 Central Plan Schemes into about 300 Central Sector and 30 Centrally Sponsored Schemes Answer in the comments.>
• A sub-group of CMs was formed under NITI Ayog to review the Centrally Sponsored Schemes, which suggested that there should be two basket of schemes – one mandatory for all states and other optional

New Initiatives

Expenditure

The total expenditure in the Budget for 2016-17 has been projected at Rs 19.78 lakh crore, consisting of Rs 5.50 lakh crore under Plan and Rs 14.28 lakh crore under Non-Plan.< Keep in mind, our non-Plan expenditure is higher than Plan expenditure> Answer in the comments.>

Various committees have questioned the merit in having Plan and Non-Plan classification of govt expenditure. Govt. has decided that the classification will be done away with from fiscal 2017-18 and it will give greater focus to Revenue and Capital classification of govt expenditure.

Quality of Expenditure: Every new scheme being sanctioned by govt will have a sunset date and outcome review, in order to improve the quality of govt expenditure Answer in the comments.>

Fiscal Responsibility and Budget Management Act (FRBM Act)

• Since FRBM involves rule-based budgeting, it has significantly helped both central and state govt
• However, there are suggestions to move from fixed numbers for fiscal deficit targets to a fiscal deficit range as the target. This would give necessary policy space to the govt to deal with dynamic situations
• Therefore, Budget proposed a committee to review the implementation of the FRBM Act

PS: Please click on the green hyperlinked text to read more about the concepts. Revise and revise & feel free to ask pertinent questions.

Published with inputs from Pushpendra | Image: Finmin