NEW DELHI: Finance Commission chairman
N K Singh
said on Friday that governments needed to target reviving growth, and focusing on expenditure cuts or fiscal consolidation should not be a priority at a time when the Centre and states are battling the
While acknowledging that both the Centre and states are facing fiscal pressure due to a fall in tax revenue, Singh said that structural reforms will help rev up the economy faster and several steps had already been initiated. “This is not the time to talk of fiscal consolidation. This is the time in which the world believes that what needs to be protected is the expenditure over fiscal deficit and this is exactly what the Centre has done,” he said after a meeting of the Economic Advisory Council of the
15th Finance Commission
that the panel, which has been tasked with devising the formula for sharing Centre’s taxes with states, was finding it difficult to decide the base year as the current financial year may not be best suited given the adverse impact of the pandemic. “Historically, finance commissions for making projections have used the year in which they make the award as the base year. This year, on account of extraordinary factors, using the current year in which we are as the base year has got many challenges,” Singh said, adding that various options are being considered.
Finance commissions make their projections and decide the award of each state’s share after deciding the base year for calculations.
Singh said the commission, which is to be submit its report later this year, will focus on improving the healthcare system and the infrastructure and had also set up a panel under
member Ramesh Chand to look into incentivising states that reformed agriculture. The first report of the panel, which has been implemented, has already seen the government offer additional borrowing space to states that amend APMC law.
Asked about the suggestion of the GST Council borrowing from the market to provide support to states till the compensation cess is paid, Singh said that it was “kite flying” at the moment.