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'Permissible limits on borrowings should be equally applicable to Centre, States'

By Religare

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, opined the leading economists in a meeting with Fifteenth Finance Commission held on Thursday.

'Permissible limits on borrowings should be equally applicable to Centre, States

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 included, Significant issues raised today 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, while 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 projectionand other key variables like employment as well as in determining measurable criteria. While the TOR were broad ranging, the commission has significant latitude defining its own procedure of work under the Constitution.

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 panchayats which were both realistic and would genuinely deliver the intended resources to the beneficiaries.

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