15th Finance Commission’s fiscal consolidation panel to meet on Thursday

A committee under the 15th Finance Commission will on Thursday discuss the fiscal consolidation roadmap of the central and state governments.

The commission under Chairmanship of N K Singh has been mandated to workout the fiscal consolidation roadmap for the government for the period – 2021-22 to 2025-26.

“This task has been complicated by the extra-ordinary situation caused by the spread of the pandemic and the concomitant fiscal compulsions on the Central and State Governments,” an official statement said.

The central government has already increased the borrowing limit of states by 2 percentage points of GSDP (Gross State Domestic Product) from 3 per cent that was already available.​

The commission will make recommendations on the fiscal consolidation roadmap of the central and state governments, taking into account their responsibility to adhere to appropriate levels of debt and deficit levels, while fostering higher inclusive growth, guided by the principles of equity, efficiency and transparency.

In pursuance of this, the 15th Finance commission constituted a panel on March 18 to review the fiscal consolidation roadmap of the general government.

“In order to take stock of the emerging fiscal scenarios and to chart the way forward, an online meeting of the aforesaid Committee has been scheduled for tomorrow,” the statement said.

The meeting is likely to be attended by N K Singh (Chairman), Ajay Jha and Anoop Singh, Members of the 15th Finance Commission, Chief Economic Adviser Krishnamurthy Subramanian, Controller General of Accounts Soma Roy Burman , Rajat Kumar Mishra, Joint Secretary in the Ministry of Finance.

Besides, S Krishnan, Additional Chief Secretary of the Tamil Nadu government, Anirudh Tiwari, Principal Secretary, Punjab and Sajjid Z Chinoy and Prachi Mishra, eminent analysts, will also participate in the meeting.

The Centre on May 17 raised the borrowing limit of states from 3 per cent of gross state domestic product (GSDP) to 5 per cent in 2020-21, which will make available an additional 4.28 lakh crore.

However, part of the increased borrowing limit would be linked to specific reforms – universalisation of One Nation One Ration Card, Ease of Doing Business, Power Distribution and Urban Local Body revenues.

With this, a 0.5 per cent increase in borrowing by states i.e. from 3-3.5 per cent, would be unconditional.

The next 1 per cent, which is up to 4.5 per cent, will be released in 4 tranches of 0.25 per cent and each of the tranches will be linked to a measurable and feasible reform.

The last 0.5 per cent will be given once the milestones are achieved in at least three of the four reform conditions.

Currently, states have a net borrowing ceiling of 6.41 lakh crore based on 3 per cent of GSDP and various states had written to the Centre to increase the borrowing limit to enhance their resources during the COVID-19 crisis. 

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One thought on “15th Finance Commission’s fiscal consolidation panel to meet on Thursday

  • 31st May 2020 at 4:10 PM

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