Fiscal deficit range rather than a point is need of the hour for India, says NK Singh – The Economic Times

Clipped from: https://economictimes.indiatimes.com/news/economy/indicators/fiscal-deficit-range-rather-than-a-point-is-need-of-the-hour-for-india-says-nk-singh/articleshow/79681332.cmsSynopsis

In November, the 15th FC had submitted its final report for the five year period from FY22-26 which included recommendations of a roadmap towards fiscal consolidation for the government, apart from the formula for devolution of taxes with the states.

fiscal deficit range rather than a point, based on expenditure outcomes, may be the need of the hour for India, according to NK Singh, chairman of the 15th Finance Commission (FC).

“A fiscal range than a fiscal point based on expenditure outcomes may be the need of the hour,” Singh said, virtually addressing the Federation of Indian Chambers of Commerce & Industry’s (FICCI) 93rd Annual General Meeting on Friday.

In November, the 15th FC had submitted its final report for the five year period from FY22-26 which included recommendations of a roadmap towards fiscal consolidation for the government, apart from the formula for devolution of taxes with the states.

Speaking on the topic of reinforcing federal trust, Singh said that there was a need to continue aligning the fiscal consolidation roadmap of the Centre and the states in a more harmonious symmetry, adding that this was an arduous but inescapable task.

The former bureaucrat highlighted the need for a more credible policy on rationalisation of centrally sponsored schemes and advocated for the constitution of an Empowered Group of domain experts to come out with such a policy.

“We need to constitute an Empowered Group of domain experts to submit to the finance minister and Prime Minister on modalities of further and deeper rationalisation of these centrally sponsored schemes,” Singh said.

An internal examination by the 15th FC found there to be about 211 schemes and sub-schemes, costing nearly Rs 7 lakh crore per year, to which the Centre contributed over Rs 3.5 lakh crore or 1.2% of GDP.

NKSingh

Singh also noted the need for improved coordination between the FC and the Goods and Services Tax (GST) Council as an “inescapable necessity”.

While the FC considers projections of expenditure and revenue to come up with a tax devolution formula, the GST Council decides on issues of GST rates, exemptions, changes, and implementation of indirect taxes.

“This leads to unsettled questions on the ways to monitor, scrutinise and optimise revenue outcomes,” he said.

The chairman also touched upon topics like the need to fill the vacuum left after the abolition of the Planning Commission, to strengthen local body governments and to revisit the seventh schedule of the Constitution which divides the policy subjects areas for states and the Centre.

Singh asserted that federalism in India must go beyond partnership which is not embedded wholly in fiduciary obligations. “Federalism may be flexible. Trust is not; it needs constant nurturing and rejuvenation,” he said.

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