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Economic Survey: Fresh thinking on a responsible fiscal policy framework required

These inflation shocks effectively reduced the value of outstanding debt

July 09, 2014 1:51 IST | India Infoline News Service
Fresh thinking is required on a responsible fiscal policy framework. The fiscal situation of the central government is worse than it appears, given the acceleration of inflation from 2006 to 2014. These inflation shocks effectively reduced the value of outstanding debt. This has harmed the interests of households but has reduced the debt burden of the government. These inflation shocks are unlikely to recur in the future.

This warrants a fresh thinking on a responsible fiscal policy framework. This should feed into a new FRBM Act. The modified Act needs to take into account business cycles and to have penalties that are strong enough so that it cannot be ignored.

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