Finance Commission sets up committee to review fiscal consolidation road map

On March 19, 2020, an 8-member committee is set up by Finance Commission(FC) to review the fiscal consolidation road map of state & central governments. The committee is headed by 15th Finance Commission Chairman N K Singh.Key Points:

i.By considering all of India’s explicit and measurable debt, it will make recommendations on the definition of deficit & debt for central government, overall states, general government and public sector enterprises (government levels) by bringing consistency between the definition of debt(stock) and deficit(flow).

ii.It lays down the principles for arriving at the general government debt & consolidated public sector while avoiding double-counting.

iii.It will define contingent liabilities of the government, provide quantifiable measures of such liabilities & specify conditions under which contingent liabilities become explicit liabilities.

iv.Based on the above definition the committee will evaluate the level of debt and the government’s deficit at various levels.

v.It will also recommend a debt & fiscal consolidation roadmap for FY 2021-25 for each of the levels of government mentioned & attempts to build up scenarios for public sector enterprises.

vi.The other members of the committee include- A N Jha, Anoop Singh (members of FC); S Krishnan- additional chief secretary of Tamil Nadu;Anirudh Tiwari- principal secretary of Punjab; 2 outside experts Sajjid Z Chinoy& Prachi Mishra.

vii.Apart from them 1 representative each from the Office of the Comptroller and Auditor General of India, the Controller General of Accounts, Joint Secretary (Budget) of the Department of Economic Affairs will also be its members.

viii.Analytical & data support will be provided by a team from the National Institute of Public Finance and Policy & economic division of the Finance Commission Secretariat will facilitate & support the committee.

About FC:

• In 1951, under the article 280 of the constitution it was established to assess the financial position of the Union and State Governments, recommend the sharing of taxes among them, and set out policies to determine the distribution of these taxes among the States.
• The FC (Miscellaneous Provisions) Act, 1951 defines the terms of qualification, appointment, disqualification, term, eligibility & powers of FC.
• The 15th FC was constituted on 27 November 2017 against the abolition of the Planning Commission (the difference between plan and non-plan expenditure) & the introduction of Goods and Services Tax (GST).