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Make Fiscal Discipline Enforceable & Independently Verifiable
- Published on 20 July 2019
(Edited Image from RBI's Financial Primer - Money Kumar & Monetary Policy)
The Finance Ministry should introspect over fiscal opacity that figured other day in the deliberations between two constitutional bodies.
Three days after the presentation of Union Budget, fifteenth Finance Commission (FFC) Chaired by N.K. Singh met Comptroller & Auditor General of India (CAG) Rajiv Mehrishi along with other CAG officials.
They discussed lack of underlying conceptual framework on fiscal transparency and under-reporting of deficit and debt. Another key issue that figured in talks was “Potential risks of absence of revenue deficit as a target”, according to FFC release.
FFC & CAG also discussed quality of capital expenditure; asset accounting; expenditure management and impact of GST on revenue.
As put by the release, “the issue of fiscal transparency in the fiscal reporting of the Union and State Governments was discussed especially in the light of increasing trend of off-budget and extra-budgetary resource raising by the governments. CAG highlighted the fiscal risks due to non-transparency”.
It adds: “International standards and amended FRBM Act, 2003 prescribes the inclusion of such off-budget resources to be included in the definition of debt. However, its completeness and reliability in the present form has been a concern for the CAG”.
FFC & CAG would again meet soon to carry forward their discussion. Both are bound to raise concerns on fiscal deficiencies in their respective reports in the coming months.
Dr. Rathin Roy, Director and CEO, National Institute of Public Finance and Policy (NIPFP) has already flagged fiscal concerns immediately after the presentation of the budget.
In his column titled 'A silent fiscal crisis?' published by a leading business daily, he started with the observation: “This year’s Budget speech was the first I have seen that, in my memory, has no paragraphs on the fiscal situation which, along with the tax proposals, is at the core of any Budget”.
India’s fiscal issues are also expected to come under scrutiny from outside quarters too. International Monetary Fund (IMF) is expected to take a call on these in the near future. This would happen when it considers annual IMF staff report on India sometime during the next four weeks.
BEPS’s Verifiable Impact on Global Economy Difficult to Capture
- Published on 10 July 2019
(Edited Image Courtesy: OECD)
“Our action has had a very concrete impact. First, you and other countries in the world have recovered taxes which had been defrauded for too long,” says a report from Organisation for Economic Co-operation and Development’s (OECD) Secretary General (SG), Angel Gurría.
The report on OECD/G20’s Base Erosion and Profit Shifting (BEPS) & related projects, submitted last month to The G20 Finance Ministers and Central Bank Governors, adds: “The very high profile of our work against tax fraud and tax avoidance has brought tax matters to the boardrooms and is having a massive impact”.
Have BEPS & related projects indeed delivered dazzling results? OECD, the projects proponent, would like the world to believe so.
G20 has, however, avoided endorsing success story as detailed out by SG’s report. International Monetary Fund (IMF) has also avoided optimism over BEPS outcome. It is here pertinent to cite IMF’s G-20 Surveillance Note issued last month.
As put by the Note, “There is an urgent need for a cooperative multilateral approach to reform the current system of international corporate taxation to address tax competition and reign in prevalent profit shifting by multinationals”.
Catalyze Growth by Optimizing use of Multilateral Loans
- Published on 05 July 2019
(Growth Image Courtesy: taxindiaonline.com)
“For the last 18 months there had been paralysis on the economic front. The last two governments postponed taking vital decisions. The fiscal position was allowed to deteriorate”, stated Prime Minister P.V. Narasimha Rao on 9th July 1991 in a broadcast to the Nation explaining rationale for reforms.
If late Mr. Rao served as PM today, he might have made a similar about observation about policy paralysis (PP) in the arena of independently verifiable urban reforms (UR). PP led to cancellation of two world Bank-aided, UR projects - one in 2006 under UPA and another in 2019 under Modi-led NDA Govt.
These & similar other cancelled projects have ensured that urban rot persists. The rot explode periodically as it is now: Over two dozen deaths due to recent wall collapses in Maharashtra and Odisha, average 10 pot-hole deaths/day across India, avoidable fire tragedies, water crisis as in Chennai and other cities and unstoppable growth in slums. Monsoon mirrors state of Governance in India.
All problems are due to multiple flaws in urban governance for which Centre, States & cities need to share the blame. On paper, the Union Government is executing wonderful urban reforms.
Cancellation of two successive UR-linked, cities development projects is not an isolated case of India dropping project proposals. Such developments happen every year after long negotiations with multilateral financial institutions (MFIs) such as World Bank (WB), Asian Development Bank (ADB), etc.
Assess State of Cooperative Federalism with an Open Mind
- Published on 19 June 2019
“We have invited her with all due respect and I am still hoping that she will accept my personal invitation and attend the meeting on June 15th and give us the idea as to how to improve Niti further”.
Niti Aayog Vice-Chairman Rajiv Kumar stated this while responding to West Bengal Chief Minister Mamata Banerjee’s decision to boycott NITI Aayog’s (NA’s) fifth Governing Council meeting (GCM).
She should have changed her mind and attended the meeting. The least she can do even now is to submit a detailed paper on weakened Cooperative Federalism (CF) to him.
The suggested paper should list flaws in NA’s working as compared the performance of National Development Council (NDC) and Planning Commission. These two institutions, created by Jawaharlal Nehru, were wound up by Modi Government in 2015.
Other Chief Ministers from Opposition-ruled States should have latched on to Dr. Kumar’s offer to give suggestions to improve NA’s working.
Mamata didi has indeed erred by writing to Prime Miniser Narendra Modi, who is also NA Chairman, that she would not attend the meeting. Boycott and sulk is not the solution. Participation in the meeting to put hard facts about damage done to CF is the way to go.
She should take a leaf out of late Selvi J. Jayalalithaa’s book.