15th Finance Commission to examine performance-based incentives for states
NEWDELHI: Seeking to strike a balance between the rights and responsibilities of states in a federal structure, the centre has asked the 15th Finance Commission (FFC) to offer fiscal incentives to states that perform well on parameters including improvements in ease of doing business and sanitation, and rein in populist measures.
Former revenue secretary NK Singh, who is also a member of the ruling Bharatiya Janata Party (BJP), was on Monday named head of the FFC, whose terms of reference were notified by the government.
Apart from Singh, members of the Commission include former economic affairs secretary Shaktikanta Das and adjunct professor at Georgetown University Anoop Singh. Bandhan Bank chairman and former chief economic adviser Ashok Lahiri and Niti Aayog member Ramesh Chand have been appointed parttime members.
The Commission, whose recommendations, will come into effect for five years starting April 1, 2020 has been asked to submit its report by October 30, 2019.
Apart from performing its constitutionally mandated job of deciding on the distribution of shareable central tax proceeds among centre, states and local bodies for the first time in the post-goods and services tax (GST) era, the FFC has been asked to recommend appropriate levels of general and consolidated government debt and deficit levels for the centre and state governments.
The FFC will arrive at the figures after reviewing the current state of finances, deficits, debt levels, cash balances and fiscal discipline efforts by both the centre and states.
The Commission has also been asked to propose measurable performance-based incentives in areas such as efforts made by the states in expansion and deepening of the tax net under GST; and efforts and progress made in moving towards replacement rate of population growth, which refers to the total fertility rate that will result in a stable population without increasing or decreasing it.
Other parameters include progress made in increasing tax/ non-tax revenues, promoting savings through adoption of direct benefit transfers, promoting a digital economy and removing layers between the government and beneficiaries of welfare programmes.
The FFC will also consider achievements made by states in implementation of flagship schemes of the centre and disaster resilient infrastructure, reaching sustainable development goals, and quality of expenditure. Progress made in increasing capital expenditure, improving the quality of such expenditure, and promoting labour-intensive growth have also been included in the terms of reference for the FFC.