Revamping FRBM – Fiscal Responsibility and Budget Management (FRBM) Act 2003 was meant to bring deficit under control. But it is now flawed because it allows no flexibility in fiscal deficit target. It should be revamped. Rationale behind the fiscal deficit trajectory should be stated (which can come from Debt to GDP ratio which is 66%) and should carry a flexibility to modify the fiscal deficit.
Adequate Expenditure – India’s govt. expenditure is 26.6% of GDP which is less than the average 31.7% of emerging nations of G-20. The need is not to cut expenditure to reduce CAD (Current account deficit) but to decide the expenditures and then raise the revenue accordingly. Approach should be changed.