How will the expected award of the Sixth Pay Commission be accounted for?
The award is yet to come. The previous Pay Commission award translated into an impact of 0.4 per cent of GDP. I do not expect it to be higher than this level this time around. The 13th Finance Commission would be asked to set new Fiscal Responsibility and Budget Management targets. What are the expectations? The FRBM rules have set out targets till only 2008-09. That does not imply that any government can violate the principles of fiscal prudence after that date. The matter will be looked into by the finance commission, which will review central government finances as part of its mandate. A roadmap for fiscal adjustment given by a constitutional body like the Finance Commission will have greater credibility. The revenue deficit has been paused for one year. Will it require an amendment to the FRBM Act? There is no need to amend the Act. The deficit targets have been set out in the Rules and not the Act. In any case, the Act does not cast targets in stone. It provides enough flexibility
