Students of the 2020-21 Class of the one-year Post Graduate Programme in Public Policy & Management at IIMB hosted Mr. N.K. Singh, Chairman, XV Finance Commission, in the Policy Talk series on July 22nd (Wednesday).
Prior to the position as Chairman of the XV Finance Commission, Mr. Singh presided as Chairman of the Fiscal Responsibility and Budget Management Review Committee (FRBM), responsible for setting targets for the government to reduce fiscal deficits. He also served as a member of the Upper House of the Parliament, the Rajya Sabha, from 2008 to 2014, during which time he contributed to several prominent Parliamentary Standing Committees including the Public Accounts Committee, the Committee on Foreign Affairs, and the Committee on Human Resource Development.
Mr. Singh has enjoyed a long and distinguished career as a member of the Indian Administrative Services before his entry into politics and fiscal policy leadership. He served as Expenditure Secretary, responsible for overseeing the public financial management system in the Central Government and matters connected with state finances; Revenue Secretary, responsible for exercising control in respect of matters relating to all the Direct and Indirect Union Taxes and putting together ‘dream budget’, Secretary to the Prime Minister of India, among other senior leadership roles. As a member of the erstwhile Planning Commission, he was heading the Expert Committee on Power Sector Reforms, introduction of renewable form of energy as well as the important committee on Foreign Direct Investment to India. The responses to these recommendations opened India substantially for larger foreign equity flows. He was part of the core group of advisors and strategists during India’s economic reforms of 1991. He was principal interlocutor for negotiations with the World Bank and the International Monetary Fund (IMF) for structural adjustments, loans and Balance of Payment support instrumentalities.
Today, addressing the PGPPM students at IIMB, the well regarded academician, bureaucrat and policymaker spoke on ‘Impact of Pandemic on Fiscal Architecture – Fiscal Federalism in the Near Future’.
“I value this opportunity to engage with IIMB at this inflection point in our fiscal polity. Not many of us have any memory of the Spanish flu or the Bubonic plague that afflicted parts of the world. In recent memory, this is the very first pandemic in full blown scale. Like in other walks of life, in fiscal architecture too, we need to reset the button,” he observed.
In the first part of his lecture, Mr. Singh dwelt on the evolution of fiscal federal architecture in India, while in the second part he described the current challenges.
On the genesis of fiscal federalism, he traced it to the Govt. of India Act of 1919 and the Govt. of India Act of 1935 – the first which provided for a separation of revenue heads between the centre and the provinces, while the latter provided for sharing of revenues and established the basic structure of fiscal federalism in India. He explained the dichotomy between “the use and misuse” of Article 282 – implying that it doesn’t matter if a subject is in List 1, 2 or 3, grants may be given under Article 282, superseding the Lists.
“There are 211 schemes and 29 sub schemes of centrally sponsored schemes using this provision. They add up to INR 6-7 lakh crores. The schemes – like ‘Ayushman Bharath’ – continue to grow,” he said, adding that in theory and in practice the vision that prompted our forefathers to give clear demarcation between subjects stands substantially modified. “The strata of the centrally sponsored schemes does spread over a wide canvas, making the distinction highly opaque. This constitutes a dichotomy, if not tension.”
Mr. Singh declared that unless the clutter and opaqueness between the application of Article 282 and the 7th Schedule of the Constitution is cleaned up, fiscal architecture would remain clumsy and ill designed to meet contemporary challenges like changed electoral politics - people’s aspirations and obligations of national leaders, as well as technology advancements.
Resetting the federal context in times of the pandemic
“There is the Disaster Management Act of 2005 and the Epidemic Diseases Act of much earlier times. What is being done in management of the pandemic is in keeping with these Acts. This again leads to clutter,” he said.
Pointing out that India’s record has been far more credible in handling the dynamics of Centre-State responses in pandemic management when compared to countries like the United States, notwithstanding the clutter, he said: “Our record and practice has been more credible than say that of the Governor of New York constantly complaining of the responses of the President of the US!”
In the context of revenue, this is the time for fiscal norms to be suitably relaxed. “States need greater room to meet additional obligations caused by the pandemic,” he added.
In his concluding observations, he said there are issues of the short term and the long term. “In the long term, we must address issues that are germane – clean up the clutter of the 7th Schedule looking at today’s compulsions. In the short run, let us deal with the clutter of the Disaster Management Act and Epidemic Diseases Act.”
Watch the video here: https://youtu.be/XFtSwNF-syE