For a new governance agenda

A Rangachari | Updated on March 12, 2018 Published on April 30, 2014

A shift towards fiscal discipline and more power to the CAG would be welcome

The prime concern of the electorate is good governance. This involves functioning of constitutional institutions and offices, accountability to the public and transparency in governance.

Specific reforms are needed to overcome existing problems. A reform worth looking at is to restrict the selection of the Prime Minister to the Lok Sabha. This will require an amendment to the Constitution.

However, this can be achieved by evolving a convention. In Britain, which lacks a written Constitution, the century-old convention is to have the PM only from the House of Commons and not the House of Lords.

The Parliament’s functioning is eroded by promulgation of ordinances. The ordinance route can be adopted only if the conditions prescribed in the Constitution are met.

Enhance CAG’s scope

A pivotal office under the Constitution of India is that of the Comptroller and Auditor General of India (CAG). Parliament is accountable to the public for ensuring that public money is raised and spent properly. The CAG plays a crucial role in assisting Parliament in this area. He has a wide mandate covering the gamut of revenue and expenditure.

Performance audit reports on schemes and projects must go beyond financial audit. Regrettably, the government tends to take a narrow and negative view of his audit as mere financial audit.

It is time the government took note of the wider role of the CAG to ensure financial accountability.

There are two areas where the CAG’s role can be expanded. Public sector banks continue to be outside the purview of the CAG, according to the Bank Nationalisation Act. The Act has to be amended to make CAG review possible.

The other area for widening the CAG’s audit is public private partnerships (PPPs), involving audit of initial records of private companies in PPPs. The April 18 Supreme Court ruling enables the CAG to audit the accounts of telecom companies which share revenues with the government for using spectrum. This has a far-reaching impact across such sectors as power, mining and roadways, where PPPs are in force and companies share revenue with the government.

Fiscal discipline

Fiscal prudence in raising funds and spending is another key issue. Corrective steps need to be taken to keep the fiscal deficit in check, as this impacts growth and inflation.

The Constitution left it to Parliament to fix public debt limits. In 2003, the Fiscal Responsibility and Budget Management Act was passed. Ten years after the Act, the specified fiscal deficit target has not been achieved.

More alarming is the casual approach to this historic legislation. The focus is only on the extent to which the deficit has been reduced, and not by what means. The deficit number itself may be the result of understatement or postponement of expenditure.

Effective deficit reduction requires a fundamental review of all the revenue and expenditure items in the Budget and rationalisation to control inflation and promote economic growth.

Two issues deserve special mention. No action has been taken on the retrieval of black money stashed abroad. This has drawn strictures from the Supreme Court. The other issue is corruption at all levels of government and delays in dealing with them, that have come in for criticism by the Court. The implementation of the Prevention of Corruption Act has to be tightened and the public kept aware of action taken.

The government should publish action taken on individual items of revenue and expenditure. It should also throw light on how it fixes deficit targets — in consultations with the Reserve Bank of India and the State governments in this regard.

Transparency in appointment to crucial positions such as the CAG and the RBI Governor is essential for good governance and instilling public confidence.

The writer is a former Budget Adviser, International Monetary Fund

Published on April 30, 2014
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