By TIOL News Service

NEW DELHI, MAY 18, 2018: THE meeting of 15th Finance Commission with economists and domain experts was held yesterday. Economists opined that the permissible limits on borrowings under Fiscal Consolidation roadmap needed to be equally applicable to Centre and States in the context of overall macroeconomic framework. Economists further opined that it would be realistic to use contemporary population data but weightage should be assigned to population and also rewards for population stabilization policy. It could be appropriately determined by the commission. Commission needs to balance equity with efficiency.

Significant issues raised and discussed in meeting included:

++ New context post abolition of Planning Commission which has altered the traditional system of resource allocation and consequently abolition of distinction between Plan and Non-Plan funds

++ Furthermore, issues of uncertainty pertaining to GST needed to be fully factored in.

++ Issues of rewards for past performance needed to be balanced with incentivizing future performance.

++ Inadequacy of data and its reliability constituted a significant handicap in realistic revenue projection and other key variables like employment as well as  in determining measurable criteria .

++ The taxation capacity of states and any formula on devolution needed to be formed by equity, justice and uniformity.

++ While the TOR were broad ranging, the  commission has significant latitude defining its own procedure of work under the Constitution .

++ There were  several key challenges in  making robust projections on GDP, pension liability, revenue realization and  availability of resources beyond devolution for grants-in-aid .

++ State finances were stressed inter alia due to the behavior of Power Sector and implication of UDAY bonds on interest liability of states.

++ The future of Centrally Sponsored Schemes remained problematic with changing pattern of funding and a holistic view needs to be taken. 

The Chairman summing the discussion felt that continued engagement with Domain Experts over the coming months will help commission in firming up the approach before reaching tentative conclusions both on the vertical and horizontal devolution of revenue. Besides an approach for local bodies and which were both realistic and would genuinely deliver the intended resources to the beneficiaries. The Commission was chaired by N. K. Singh and other members were also present.