Finance Commission meets eminent economists in Mumbai

Speed Post News Network

New Delhi : The 15th Finance Commission met eminent economists in Mumbai on May 8, 2019, during its two-day visit to the city. The economists put forth  diverse issues for the consideration of the Commission including the need to adopt a total view on the borrowing requirements of the consolidated public sector. This should encompass off-budget transactions, borrowings of the public sector undertakings and contingent liabilities of both the Union and State Governments. This is important from many angles including debt sustainability, fiscal transparency and proper coordination of fiscal and monetary policies.

The economists said it  should be carefully examined whether the increased tax devolution by the 14^th Finance Commission has led to improvements in the social spending of State Governments. There is possibly a mismatch between the demand and supply of state development loans, which can affect the cost of borrowings of state governments in the next five years, they said and added that given the maturity profile of state loans, there can also be repayment pressure on these loans during the period of the 15^th FC. Indications are that the fiscal deficit to GSDP ratio of the States taken as a whole is gradually declining, after the spike seen in 2015-16 and 2016-17.

Some economists urged the Finance Commission to consider reinstating the system of specific-purpose grants to ensure development of social sectors and other sectors that require handholding.  Finance Commission may also consider the need for achieving comparable service delivery standards across the country as its guiding principle. A suggestion was raised for Finance Commission to consider giving priority to the development of a very robust statistical system in the country in its recommendations.

The economists also made suggestions regarding the formula for horizontal devolution of Central taxes among States and the provision of grant-in-aid to the State Governments.  The suggestions related to weight of income distance in the devolution formula, the need to consider the quality of forests in addition to its quantity and the need to consider and incentivise human development through a system of grants or tax devolution.  A few economists also said that intra-state inequality is another aspect that begs for the consideration of the Finance Commission.

Given the shift from the use of 1971 population to 2001 population, some economists pointed towards the need for instituting an incentive structure in devolution.  The composition of population in terms of proportion of elderly in population is becoming significantly different across States.

Economists present at the meeting were: Dr  Rupa Rege Nitsure, Saugata Bhattacharya, Prachi Mishra, Dr. Samiran Chakraborty, Pranjul Bhandari, Ashu Suyash, Anjan Deb Bose, Naresh Takkar, Soumya Kanti Ghosh, Ajit Ranade, Prof. Ashima Goyal, and Dr S L Shetty, according to a PIB release.