Economy

‘Difficult to assume one nominal growth number’

Shishir Sinha/ Richa Mishra New Delhi | Updated on October 11, 2020 Published on October 11, 2020

NK Singh, Chairman, Finance Commission   -  PAUL NORONHA

Many assumptions may require change, particularly in the area of debt, says NK Singh, Chairman of the Finance Commission

Amidst animated discussions on the need to revisit the current mechanism of fiscal consolidation as borrowings by the Centre and States are on the rise, NK Singh, Chairman of the 15th Finance Commission, who also headed the FRBM (Fiscal Responsibility and Budget Management) review committee, said the decision lies with the sovereign.

“We have not said that…we are only articulating the views of members of the Economic Advisory Council, all of whom are domain experts. Many of them are macro economists of high credibility. Most of them said that many of these assumptions may require change, particularly in the area of debt.

“One of the disadvantages of the old FRBM was that it was mainly focussed on the Central government. There was little or no focus on disaggregated data on debt in respect of the States,” Singh told BusinessLine.

On the issue of nominal growth rate being taken for the finalisation of report, he said that unlike earlier Finance Commissions, this Commission was not so advantageously placed, as to assume one number for the entire period of five years.

Asked how the allocation for the health sector will work out given the financial constraints faced by the States and the Centre, he said, “I don't know how the dynamics will be worked out. But certainly, we are working on it and we would complete our exercise before we submit the report to the President.”

GST issue

On the contentious issues being faced by the current incumbent in the Finance Ministry — borrowing options for GST compensation shortfall – and whether he would have preferred to handle it differently, Singh said, “Very frankly, there is a lot of noise and we need some shifting. I would say that the Central government was rather generous in guaranteeing 14 per cent to the States for five years, which, if you look at the data, was far in excess of what the States were getting based on State VAT.

“So, there was really a huge amount of generosity in guaranteeing, which was embedded in the GST Compensation Act.”

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Published on October 11, 2020
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