The parliamentary standing committee on finance has asked the Centre to prepare a White Paper on debt and a road map for fiscal consolidation in the wake of the immense pressure on government finances caused by the pandemic.
The House panel has also pushed for the RBI’s intervention in the functioning of the bad bank, which the regulator has refused to do till now.
“The committee cannot emphasise enough on the importance of clear understanding of debt and fiscal dynamics to manage the fiscal situation of the country as Covid-pandemic induced growth and fiscal dynamics could definitely increase our debt burden over the next few years,” the panel said in its report tabled in the Lok Sabha on Wednesday.
The report suggested intensive use of modelling techniques to forecast the debt situation so that the government is prepared beforehand to face contingencies.
“The DEA (department of economic affairs) should publish a White Paper on fiscal dynamics and how much fiscal space is created. They should highlight the use of fiscal resources and impact on GDP,” it said.
The finance ministry has said it would strive to bring down the fiscal deficit to below 4.5 per cent of the gross domestic product by 2025-26 against a projected 6.8 per cent for the current fiscal.
Bad bank
“The RBI should intervene and bring about administrative clarity instead of leaving each bank to deal with singular cases which may trigger hiccups and reduce the efficiency of the desired outcome. If ARCs were sufficient, there would be no need for a ‘Bad Bank’. The RBI must clarify how the ‘Bad Bank’ will operate differently from existing ARCs,” the report said.
On the National Bank for Financing Infrastructure and Development (NaBFID), the parliamentary committee said “it needs to follow Sebi’s best practices in corporate governance to ensure that public funds are appropriately utilised for the best projects rather than being captured by crony capitals in the future”.
Only the nomination and remuneration committee of the board of the infrastructure bank should appoint the non-official directors, board chairperson, MD and DMD. This committee should be chaired by an external equity investor operating in its financing capacity and with full transparency and accountability.
