‘India Needs Separate Mechanism To Enforce Fiscal Discipline’: N K Singh Vouches For Permanent Finance Commission

Chairman of fifteenth Finance Commission N K Singh has called for a dedicated institutional framework or a separate body to enforce fiscal roadmaps and reign in the fiscal deficit.

“I’d also like to draw attention to the consolidated fiscal roadmap for the centre and states, where we have entered the era of competitive fiscal profligacy by use of Article 282 by both centre and states,” he said on Thursday (28 March) at the launch of the book “Indian Fiscal Federalism” written by Dr. Y. V. Reddy.

Article 282 allows the centre as well as state governments to make discretionary grants whenever required for a public purposes. Singh noted that while the constitution limited discretionary power exercised by the states to make grants, no such limitation currently exists for the centre. “I feel that it is time we have an alternative institutional mechanism like Fiscal Council to enforce fiscal rules and keep a check on centre’s fiscal consolidation.”

Permanent Finance Commission

He also advocated for making the Finance Commission a permanent body as the current scheme does not allow for a “recourse mechanism for mid-term correction.” Presently the president reconstitutes the commission before expiry of last one every five years.

“There is a need for recourse mechanism for mid-term correction, similar to Australian Model of continuous Grants Commission (where) ‘state relativities’ are revisited every year based on latest available data. If macro parameters go along should the tyranny of the Finance Commission be inflicted on the States for 5 years before any relief can be corrected?”

Also Read: Yeshwanthpur APMC: A Perfect Example Of Fiscal Federalism At Work