FFC members meet experts to discuss ToRs

The members of the 15th Finance Commission (FFC) met leading economists in New Delhi on Monday to discuss its work and terms of reference (ToRs). The meeting took place in the backdrop of seven states writing to President Ram Nath Kovind and seeking major amendments to the ToRs.

The economists and experts who attended the meeting included former Reserve Bank of India Governor Bimal Jalan, Aditya Birla group Chief Economist Ajit Ranade, National Institute of Public Finance and Policy (NIPFP) Director Rathin Roy, National Council of Applied Economic Research Director Shekhar Shah, NIPFP Emeritus Professor Sudipto Mundle, JNU Professor Jayati Ghosh, and CEO of Centre for Policy Research Yamini Aiyer.

Officials who were part of the meeting said that the meeting was held keeping in mind the controversy regarding the ToRs. All the ToRs were discussed, including need for revenue deficit grants and performance-based incentives for states. A source said the independent experts backed bringing back performance-based incentives for states, which was not there in the 14th Finance Commission recommendations. The FFC members, including Chairman N K Singh, and members Shaktikanta Das, Anoop Singh, Ashok Lahiri, and Ramesh Chand, also discussed the concept of ‘populist schemes’ with the experts, and how they should be defined. One of the most controversial ToRs has been incentivising states on whether they promote populist schemes or not.

“The FFC members were advised that they should take into account the revenue buoyancy of states before recommending devolution of taxes. There were also discussions on providing increased accountability and freedom to panchayats and urban local bodies,” said the person. There were also discussions on schemes like Swachh Bharat Abhiyan and how states should be rewarded for promoting behavioural change towards cleanliness among their populace. The FFC will again meet a group of economists on May 17. There will be another meeting that day with a newly formed advisory council.

Under pressure from states not ruled by the Bharatiya Janata Party to withdraw or amend some vexed ToRs, the FFC had last week announced the setting up of the council.

Members were advised to take into account the revenue buoyancy of states before recommending devolution of taxes