NK Singh, Chairman of the 15th Finance Commission, dismissed speculation that the Commission will get another extension due to the shadow cast by COVID-19 on economic and fiscal projections, which will aid in deciding formula for sharing of taxes between the Centre and states.
To a query raised by CNBC-TV18 on whether the Commission has sought or is planning to seek an extension because of the economic uncertainty caused by COVID-19, Singh replied, “The Finance Commission is not seeking an extension…we will submit out report on October 30…the Commission has got one extension, we will now submit the report on the appointed date.”
However, the Chairman stated that some suggestions were made to the Commission to give a range on the fiscal deficit, instead of a number, in its 5 year report on tax devolution. He said, “These are suggestions of the advisory panel and we will consider them while giving our suggestions”.
Singh added, “Giving a range for both the Centre and states can be considered but if we do so we will give a mean target for fiscal deficit.”
He also clarified that the Fiscal Responsibility and Budget Management (FRBM) law will need to be amended if the Commission were to suggest a range for the fiscal deficit and if the proposal was to be accepted by the Centre. Not just this, the Chairman also flagged projections on the debt GDP number made by some of the members of the Economic Advisory Committee to the Commission.
Singh further added, “There were various viewpoints on how the Finance Commission should address fiscal consolidation and the need to fundamentally revisit the FRBM Act. Fiscal deficit, debt GDP numbers are pretty misaligned, they could be significantly higher, as observed by some.”
He said some of the members indicated debt GDP could be in the 82– 83 percent range.
The Chairman has also received suggestions to submit a two-part report, first dealing with FY22 as a separate year as a sharp recovery in numbers is likely after the negative base for this year. While second part can cover the remaining four years of the tax sharing formula.
Singh, however, clarified even if this suggestion is taken on board, the Commission will not advise a different tax devolution formula for FY22 and an another one for the remaining financial years.