NCAER Recommends State-Level Fiscal Councils
NCAER Recommends State-Level Fiscal Councils
Introduction
The National Council of Applied Economic Research (NCAER) has recently recommended the establishment of state-level fiscal councils to enhance financial governance, improve fiscal transparency, and ensure sustainable economic growth at the sub-national level. These recommendations align with global best practices in fiscal management and aim to strengthen the federal structure of governance in India.
1. Need for State-Level Fiscal Councils
- Rising fiscal deficits in states necessitate better oversight mechanisms.
- Disparities in revenue generation and expenditure require balanced fiscal planning.
- Ensuring adherence to the Fiscal Responsibility and Budget Management (FRBM) Act at the state level.
2. Role and Functions of Fiscal Councils
- Providing independent fiscal forecasts and budgetary analyses.
- Monitoring compliance with fiscal deficit targets and expenditure ceilings.
- Evaluating the fiscal impact of policy decisions taken at the state level.
3. Enhancing Transparency and Accountability
- Regular publication of state financial reports and debt sustainability analyses.
- Improved fiscal disclosures to enhance public trust and investor confidence.
- Use of technology-driven financial reporting systems for real-time fiscal monitoring.
4. Implementation Strategies
- Collaboration between the central government and states for policy alignment.
- Establishing independent councils with technical experts and economists.
- Providing statutory backing to fiscal councils for effective enforcement of recommendations.
5. International Best Practices
- Adoption of successful models from countries like the UK, Australia, and the EU.
- Benchmarking fiscal rules and performance indicators against global standards.
- Encouraging inter-state cooperation for knowledge sharing and best practice adoption.
6. Impact on Economic Growth
- Strengthening fiscal discipline leading to improved financial health of states.
- Enhanced investor confidence due to better fiscal management.
- Long-term economic stability through prudent fiscal policies and responsible spending.
7. Challenges and the Way Forward
- Resistance from state governments fearing reduced autonomy in financial matters.
- Need for capacity building and training of financial experts at the state level.
- Ensuring non-partisan functioning of fiscal councils to maintain credibility.