Do We Need A Fiscal Council?

Context: Establishing new institutional mechanisms such as the fiscal council is a step in the right direction for enforcing the fiscal discipline of the government. 

Need for Fiscal Council:

• Role: It can independently assess the government’s fiscal plans against parameters of macroeconomic sustainability and put out its findings in the public domain. 
• Accountability : It will give an expert assessment of the government’s fiscal stance to aid an informed debate in Parliament. 
• The council’s mandate:

• Making multi-year fiscal projections.
• Preparing fiscal sustainability analysis.
• Independent assessment of the Government’s fiscal performance and compliance with fiscal rules.
• Recommending suitable changes to fiscal strategy ensuring consistent annual financial statement.
• Taking steps to improve the quality of fiscal data.
• Producing an annual fiscal strategy report.

Way forward:

• Limited Mandate: Start small and scale it up if the fiscal council proves to be a positive experience.

• CAG can appoint a three-member committee for a five-week duration for scrutinizing the budget after it is presented.

• Secretarial and logistic support: to the committee by CAG office from within its resources. 

• The Finance Ministry, the RBI, the CSO, and the Niti Aayog will each depute an officer to serve in the secretariat. 

• Ad-hoc mechanism: The committee will be wound up after submitting its report leaving no scope for any mission creep.
• Macroeconomic forecasts: The Finance Ministry can prepare macroeconomic forecasts instead of the fiscal council for better accountability.
• CAG’s role can be strengthened as a watchdog to prevent the government from altering the fiscal rules.