UPSC CSE Mains Syllabus: GS-3- Government Budgeting.

Independent Fiscal Council

Fiscal situation in India:

While the prevailing exceptional circumstance warrants loosening of purse strings, it is necessary that the government must return to a credible fiscal consolidation path once the crisis gets over.

The practice of repeated postponement of targets, timely non-settlement of bill payments and off Budget financing to show lower deficits has been common. The report of the Comptroller and Auditor General (CAG) of India in 2018 on the compliance of the Fiscal Responsibility and Budget Management (FRBM) Act for 2016-17, highlights these.

Some examples:

Special banking arrangements for covering arrears of fertilizer subsidy, issuing short-term bonds, unsecured loans and borrowing from the National Small Savings Fund (NSSF) by the Food Corporation of India towards meeting food subsidy and its arrears, financing irrigation projects from the Long Term Irrigation Fund (LTIF) created by the National Bank for Agriculture and Rural Development (NABARD), and financing of railway projects through borrowings from the Indian Railway Finance Corporation (IRFC) are just some examples. We are familiar also with the cases of the Life Insurance of Corporation of India buying out the Industrial Development Bank of India and the Power Finance Corporation buying out the Rural Electrification Corporation (REC) and remitting the money to the government as disinvestment proceeds.

A Fiscal Council is an independent fiscal institution (IFI) with a mandate to promote stable and sustainable public finances.

Benefits of having a fiscal council:

According to the International Monetary Fund (IMF), about 50 countries around the world have established fiscal councils with varying degrees of success. 

Abstracting from country-level differences, a fiscal council, at its core, is a permanent agency with a mandate to independently assess the government’s fiscal plans and projections against parameters of macroeconomic sustainability, and put out its findings in the public domain.  

Arguments for: 


FRBM Review Committee: 

A suggestive framework

SOURCE:”The Hindu”


Considering the current fiscal situation of India there is a strong case for a fiscal council. Analyse.