210. Amendment of section 4.
For section 4 of the principal Act, the following section shall be substituted, namely:––
Fiscal management principles.
“4.(1) The Central Government shall,––
(a) take appropriate measures to limit the fiscal deficit upto three per cent. of gross domestic product by the 31st March, 2021;
(b) endeavour to ensure that––
(i) the general Government debt does not exceed sixty per cent.;
(ii) the Central Government debt does not exceed forty per cent.,
of gross domestic product by the end of financial year 2024-2025;
(c) not give additional guarantees with respect to any loan on security of the Consolidated Fund of India in excess of one-half per cent. of gross domestic product, in any financial year;
(d) endeavour to ensure that the fiscal targets specified in clauses (a) and (b) are not exceeded after stipulated target dates.
(2) The Central Government shall prescribe the annual targets for reduction of fiscal deficit for the period beginning from the date of commencement of Part XV of Chapter VIII of the Finance Act, 2018 and ending on the 31st March, 2021:
Provided that exceeding annual fiscal deficit target due to ground or grounds of national security, act of war, national calamity, collapse of agriculture severely affecting farm output and incomes, structural reforms in the economy with unanticipated fiscal implications, decline in real output growth of a quarter by at least three per cent. points below its average of the previous four quarters, may be allowed for the purposes of this section.
(3) Any deviation from fiscal deficit target under sub-section (2) shall not exceed one-half per cent. of the gross domestic product in a year.
(4) The Central Government shall, in case of increase in real output growth of a quarter by at least three per cent. points above its average of the previous four quarters, reduce the fiscal deficit by at least one-quarter per cent. of the gross domestic product in a year.
(5) Where the fiscal deficit is allowed to vary from the target prescribed under the proviso to sub-section (2) or deviation is initiated under sub-section (4), a statement explaining the reasons thereof and the path of return to annual prescribed targets under this section shall be laid, as soon as may be, before both the Houses of Parliament.”.
Notes on Clauses:
Clause 210 of the Bill seeks to amend section 4 of the Act relating to fiscal management principles. It provides for substitution of section 4 so as to provide that the Central Government shall take appropriate measures to limit the fiscal deficit up to three per cent. of Gross Domestic Product by the 31st March, 2021; endeavour to ensure that General Government debt and Central Government debt does not exceed sixty per cent. and forty per cent. respectively of Gross Domestic Product by the end of financial year 2024-2025; shall not give additional guarantee with respect to any loan on security of the Consolidated Fund of India in excess of half per cent. of Gross Domestic Product in any financial year and ensure that such fiscal targets do not exceed after stipulated target dates.
It further provides that the Central Government shall prescribe the annual targets for reduction of fiscal deficit for the period specified therein. It also provides that the annual fiscal deficit target may exceed due to certain grounds mentioned therein. It also provides that such deviation shall not exceed one half per cent. of the Gross Domestic Product in a year. It also provides that the Central Government shall initiate deviation from the fiscal deficit target in case of increase in real output growth of a quarter by at least 3 per cent. points above its average of the previous four quarters, to reduce the fiscal deficit by at least one quarter per cent. of the Gross Domestic Product. It also provides that where fiscal deficit amount is varied from targets, a statement explaining the reasons thereof and the path of return to the annual target shall be laid before Parliament.
