Plan Committee Seeks FM To Scrap Fiscal Act Target

New Delhi: The Planning Commission, in its 11th Plan (2007-12) draft, has urged side-stepping the zero-revenue deficit aim by 2009 that is mandated by the Fiscal Responsibility and Budget Management (FRBM) Act. The 11th Plan draft document, which was recently approved by the full Planning Commission, held that maintaining zero-revenue deficit will substantially limit the government''s ability to fund flagship schemes. Finance Minister P Chidambaram has made it clear that the government is bound by the FRBM Act, 2003, which mandates it to cut the revenue deficit by a minimum of 0.5 percentage points every year. In 2006-07, the Centre''s revenue deficit stood at 2 per cent of the gross domestic product. The government has to eliminate this by March 2009. A zero-revenue deficit can restrict expenditure on health and education, which creates human capital.

Revenue deficit is the difference between revenue expenditure and revenue receipts. The Prime Minister''s Economic Advisory Council, in its economic outlook for 2007-08, has said the central government''s revenue deficit is unlikely to be removed by 2008-09 because of the forthcoming Sixth Pay Commission''s report and other unforeseens.