Ex-finance commission panel chiefs raise key economic issues

NEW DELHI: Two former finance commission chiefs N K Singh and Vijay Kelkar have raised key issues that policymakers need to address in the coming years to deal with changes in the economy.

Kelkar, who headed the 13th Finance Commission, underlined the need to rationalise the GST structure and move to a single rate mechanism, something that was recommended by the panel ahead of the key tax reform. Besides, he has recommended sharing GST receipts with the third tier - panchayats and municipal bodies - while also calling for the secretariat to be made independent of the finance ministry.

While rationalisation of rates has been discussed in the GST Council in the past, the current thinking is not in support of a single rate structure. A discussion on the issue is expected to take place after the general election.

Kelkar and Singh were awarded for their contribution to Indian fiscal architecture by TIOL Foundation on Saturday.

Singh, who headed the 15th Finance Commission, whose award is valid until March 2026, flagged several challenges before policymakers, including the rise of artificial intelligence, pointing to a possible technological breakthroughs for real time data that could make cyclically-adjusted deficits possible in a time frame necessary for the recalibration of policies. Currently, there is often a lag in adjusting policies, which creates its own set of complications for policymakers, something that central banks are grappling with at the moment in the wake of loose fiscal policy during Covid.

He also raised the issue of quality of spending and expenditure outcomes in fixing fiscal outcomes, something that policymakers have discussed but have only dealt with at the periphery.

In the same vein Singh said long-term growth emanates from investments in asset-creating infrastructure. "Do they deserve a somewhat different treatment than one-size-fits-all in determining delivered levels of fiscal deficit?" indicating that a broad stroke deficit calculation may not be the best strategy.