High Time for a Fiscal Commission

Context: The recent budget highlights the dire state of Indian economy; a fiscal commission on the line pf fiancé commission is the need of the hour.

Dire State of Indian Economy

• Decline in growth rate: halved (from 8.3% in 2016-17 to 4.2% in 2019-20)
  • Decline in national income - by 7.9%
  • Industrial output – by 9.3%
  • Output of trade and transport - 21.4%
• Erosion of revenue base: revenue receipts were only 40% of the budgeted, revenue fell from Rs16.8 trillion to Rs15.6 trillion, and dividends of PSUs fell from Rs1.9 trillion to Rs1 trillion.
• Rise in fiscal deficit:  with the rise in expenditure (from Rs26.9 trillion to Rs34.5 trillion) and fall in national income fiscal deficit ratio more than doubled from 3.5% to 9.5%).
• Goods and Services Tax (GST) compensation shortfall: fiscal transfers (Rs1.1 trillion) from the centre to states were ‘back to back loans in lieu of GST compensation shortfall (introduction of general sales tax has been costly).
• Unexamined and huge expenditure on schemes: to reward and subsidize favourites (like ‘Khelo India’, ‘green’ and ‘white’ revolutions, Ganga plan and subsidizing urea); often spurring corruption.
  • Limitation of Comptroller and Auditor General (CAG)
    • Delay in reports (years after scandals) and is often overlooked by members of parliament.
    • CAG evaluates the only a small proportion of expenditure.
  • Failure of outcome-based mechanism: to deliver tangible outcomes.

Conclusion: India’s budgetary system needs to be reviewed and revamped with the introduction of fiscal commission on the lines of the finance commission.