NK Singh Committee

The NK Singh Committee, officially known as the Fiscal Responsibility and Budget Management (FRBM) Review Committee, was established by the Government of India in 2016 under the chairmanship of Nand Kishore Singh. The Committee was tasked with reviewing the Fiscal Responsibility and Budget Management Act, 2003 (FRBM Act) and suggesting a new framework to strengthen India’s fiscal discipline and promote macroeconomic stability.

Background

The FRBM Act, enacted in 2003, aimed to institutionalise fiscal discipline, reduce India’s fiscal deficit, and promote transparency in public finances. Over time, however, significant changes in both the domestic and global economic environment—such as the 2008 global financial crisis, evolving expenditure patterns, and the need for counter-cyclical policies—necessitated a comprehensive review of the Act.
The Government of India, recognising these challenges, constituted the NK Singh Committee in May 2016 to evaluate the existing framework and recommend a fiscal policy roadmap suited to contemporary economic realities. The Committee consisted of N. K. Singh (Chairman), Dr Urjit R. Patel, Dr Arvind Subramanian, Dr Sumit Bose, and Mr Anand Sinha.

Objectives and Mandate

The Committee was tasked with:

• Reviewing the operation of the FRBM Act in light of changing economic conditions.
• Recommending a new fiscal framework that balances fiscal prudence with the need for public investment.
• Suggesting measurable fiscal indicators and targets for debt and deficit management.
• Proposing institutional reforms to improve fiscal accountability.
• Incorporating recommendations of earlier bodies such as the Fourteenth Finance Commission and the Expenditure Management Commission.

Major Recommendations

The Committee submitted its report titled “Responsible Growth: A Debt and Fiscal Framework for the 21st Century India” in 2017. It emphasised the need to move from a purely deficit-based framework to a debt-anchored fiscal policy.

Debt-to-GDP Ratio as the Anchor

The Committee proposed that the combined debt-to-GDP ratio (Centre and States together) should be capped at 60 per cent by 2023:

• 40 per cent for the Central Government.
• 20 per cent for State Governments collectively.

This ratio was intended to act as the long-term anchor for fiscal policy, ensuring debt sustainability and inter-generational equity.

Fiscal Deficit and Revenue Deficit Targets

• The fiscal deficit of the Central Government should be reduced to 2.5 per cent of GDP by 2022-23.
• The revenue deficit should be brought down to 0.8 per cent of GDP by 2022-23.
• The fiscal deficit should serve as the operational target, while debt remains the medium-term anchor.

Glide Path and Flexibility

The Committee recommended a glide path approach for achieving these targets, allowing for gradual progress rather than abrupt adjustments. It also proposed escape clauses to provide flexibility during exceptional circumstances such as:

• National security emergencies.
• Severe natural calamities.
• Structural reforms with fiscal implications.
• Sharp economic downturns.

Under such conditions, deviations up to 0.5 per cent of GDP from the fiscal deficit target could be permitted, subject to parliamentary approval and transparent reporting.

Institutional Reforms

A significant recommendation was the establishment of an independent Fiscal Council to enhance transparency and accountability in fiscal policymaking. The Council’s proposed functions included:

• Preparing multi-year fiscal forecasts.
• Conducting unbiased assessments of fiscal policy.
• Advising the government on deviations from fiscal targets.
• Improving the credibility of fiscal projections and data quality.

Additionally, the Committee suggested replacing the FRBM Act with a more comprehensive Debt and Fiscal Responsibility Bill, 2017, reflecting the new framework and targets.

Significance of the Committee

The NK Singh Committee’s recommendations marked a crucial shift in India’s fiscal policy thinking. Instead of focusing solely on annual deficit targets, it emphasised long-term debt sustainability. By advocating a rules-based yet flexible fiscal regime, the Committee attempted to balance fiscal prudence with the need for economic growth and public investment.
The proposal for an independent Fiscal Council was also viewed as an important step towards depoliticising fiscal management and ensuring data reliability. Moreover, the debt anchor approach aligned India’s fiscal framework with international best practices.

Criticism and Challenges

Despite its forward-looking design, several challenges were identified:

• The proposed targets were seen as ambitious, particularly given India’s infrastructure needs and social-sector spending requirements.
• There were concerns regarding coordination between the Centre and States, as fiscal discipline at both levels is required to achieve the combined debt target.
• The suggested Fiscal Council raised questions about its autonomy, structure, and relationship with existing institutions like the Finance Commission and the Comptroller and Auditor General (CAG).
• Implementation delays and external shocks such as the COVID-19 pandemic have complicated progress toward the suggested fiscal goals.

Contemporary Relevance

The NK Singh Committee continues to serve as a reference point for fiscal policy debates in India. While its recommendations have not been fully enacted into law, several of its principles—such as debt sustainability and fiscal transparency—have influenced successive Union Budgets and medium-term fiscal policy statements.
The focus on a debt-to-GDP anchor and flexibility in fiscal rules has become increasingly relevant in managing public finances in a post-pandemic context. Policymakers continue to refer to the Committee’s framework while framing strategies for fiscal consolidation and economic growth.