Saturday, September 2 2006 12:12 Hrs (IST) - World Time -

Mumbai: The Tarapore Committee on Fuller Capital Account Convertibility has observed that it was necessary to moderate public sector borrowing requirement and also contain the total stock of liabilities.



The approach of financial repayments out of fresh borrowings possess the danger of a vicious cycle of higher market borrowings at a relatively higher cost chasing higher repayments.

The committee recommended that a substantial part of revenue surplus of the Centre should be earmarked for meeting the repayment liability under the Centre's market borrowing programme, thereby reducing the gross borrowing requirement.

"As part of better fiscal management, the Central Government and the states should graduate from the present system of computing the fiscal defecit to measure of the public sector borrowing requirements(PSBR)," it added.

Stating that the PSBR is a more accurate assessment of the Fisc's resource dependance on the economy, the committee said, "RBI should attend a preliminary assessment of the PSBR and put it in the public domain."



The committee further recommended that the office of public debt should be set up to function independently outside the RBI.