Finance Commission Chairman NK Singh made a case for setting up a “fiscal council” as an institutional mechanism to monitor fiscal consolidation roadmap of the centre and state governments.
Speaking at the launch of book “Indian Fiscal Federalism” written by Dr. Y. V. Reddy, the former Governor of RBI, NK Singh also said fiscal federalism is a dynamic process and 'a Work in Motion'.
Referring to a suggestion in the book, Singh said he, too, agrees that there should be some mechanism to ensure that basic spirit of devolution process is not undercut by clever financial engineering or taking recourse to traditions that makes it technical and legally tenable but perhaps morally not so.
"I feel that it is time we have an alternative institutional mechanism like fiscal council to enforce fiscal rules and keep a check on the centre's fiscal consolidation," he said. Singh, who had also served as revenue secretary in the finance ministry, agreed with the suggestion in the book that the Finance Commission, as envisaged in the Constitution, does not prohibit its continuous functioning except that it has to be re-constituted before its tenure ends every five years.
Talking to reporters later, Singh said, "we do need mechanism for enforcement which will be equally applicable for both the Centre and the states before Finance Commission or any other can work out and lay out a coherent map of fiscal consolidation".
Recently, the RBI Governor Shaktikanta Das too made a case for a permanent status to Finance Commission. At the book launch event, former Deputy Chairman of erstwhile Planning Commission Montek Singh Ahluwalia underlined the need for increasing allocation of funds for the municipalities.