NK Singh, the chairman of the 15th Finance Commission, believes that the FRBM escape clause in Budget 2020 has been invoked with due caution and deliberation and thus backed the government’s decision to trigger the clause for fiscal deficit deviation.

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In an interview with CNBC-TV18’s Shereen Bhan he reasoned, “Who can deny GST is a far-reaching structural reform that has had unintended fiscal consequences?”

“I think that the escape clause has been invoked with due caution, with due deliberation, and after very careful consideration. So I don’t subscribe to the view that the escape clause has been invoked in a casual way,” he added

Finance Minister Nirmala Sitharaman on Saturday unveiled the budget for fiscal 2020-21. The FY20 fiscal deficit is now seen at 3.8 percent of GDP versus the earlier target of 3.3 percent.

The government has used the FRBM trigger mechanism for the fiscal deficit deviation of 0.5 percent for the current fiscal.

Singh also said that the ‘path of return’ has been indicated in the policy statement.

“Didn't want to risk making macro projections based on the current scenario. Once the Q1 data comes out we will give projections for the next 5 years,” he said.

The Finance Commission chairman also voiced his worry about state finances.

"The states are in compliance with the targets they have taken upon themselves under their own state-level Fiscal Responsibility and Budget Management Act (FRBM). Their debt by and large aggregated comes to around 25 percent. There are some states which are either better performers than others, there are other states where legacy debt is a very serious issue," he explained.

When asked about GDP growth, Singh said, “Right now the nominal GDP growth for next year has been assumed to be only 10 percent or so. So let’s see how the Q1 figures turn out to be before we come to any other conclusion.”

First Published:Feb 3, 2020 3:58 PM IST