Have recommended for a fixed number on fiscal deficit, says FRBM Chairman NK Singh

NK Singh, Chairman, Fiscal Responsibility and Budget Management (FRBM) Committee in an exclusive interview to CNBC-TV18's Nimesh Shah from the sidelines of The Credit Suisse 20th Annual Asia Investment Conference in Hong Kong spoke about the fiscal roadmap of India.

He said the debate is whether the fiscal deficit number should be a fixed one or a range should be given. They have given recommendations for fixed number on fiscal deficit, he said.

According to him, India's fiscal roadmap is stable with predictable outcomes. India's macro economic framework is stable too, he added.

Below is the verbatim transcript of the interview.

Q: What is your view on the fiscal roadmap of India?

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A: This debate on fixed number versus arranged was something that the committee has certainly looked at. We looked at international experience, we had interactions with  Organisation for Economic Co-operation and Development (OECD), with the World Bank, with IMF, with Asian Development Bank, with rating agencies.

In robust parliamentary democracies, popular governments, if you give a range, usually begin to operate at the top end of the range. So it does not become a range anymore, becomes a fixed number, the upper number. So instead of that, we have given recommendations for a fixed number on fiscal deficit but have suggested that there could be exceptional circumstances where upto 0.5 percent of gross domestic product (GDP), you could under very specified circumstances deviate from the particular fixed number, which has been given.

So in a sense, there is a range which is implied in the committee’s report without allowing latitude and discretion in a very loose way because the entire philosophy is that countries which are governed by rule based laws are better served in terms of macroeconomic stability than countries which believe in discretion allowing fiscal latitude to become uncertain.

Q: At the conference in Hong Kong, you spoken specifically about the fiscal roadmap for India, your thoughts on that and what one should expect going forward?

A: I think I did speak on the fiscal roadmap about India. I found that this seems to be a wide measure of acceptance among the people who ask me questions on the macroeconomic framework and the strategy, which is embedded in the recommendations of this fiscal committee’s report. So I have spoken at length on that. As I can see it, I think that India’s fiscal roadmap is not a bumpy one, which the subject of my talks suggested but it is a stable one with predictable outcomes and with a combination and a congruence of a sound monetary policy which is embedded now in the inflation target taken by monetary policy committee.

Now in the fiscal roadmap, we do believe that India’s macroeconomic framework is stable, it will inject investor confidence, it will lend credibility and it augurs well for India’s medium-term high growth trajectory.