Develop robust stats system, Finance Commission urged

Last Updated: Thu, May 09, 2019 17:03 hrs
RBI (Reuters image)

Mumbai: Amid a high voltage debate over statistical data, eminent economists in Mumbai on Thursday suggested that the Finance Commission "prioritize" the development of a robust statistical system.

Finance Commission members are on a two-day visit to Mumbai to meet officials of the Reserve Bank of India (RBI), banks, financial institutions and economists to discuss several key issues.

"A suggestion was raised for Finance Commission to consider giving priority to the development of a very robust statistical system in the country in its recommendations," an official statement said on Thursday.

Several economists in a statement released earlier questioned the government's intent behind the Gross Domestic Product (GDP) methodology revision, and called for the restoration of the independence of statistical bodies in light of the allegations that the government was suppressing uncomfortable data.

Besides, other issues like the need to adopt an overall view on the borrowing requirements of the consolidated public sector were raised.

"It should be carefully examined whether the increased tax devolution by the 14th Finance Commission has led to improvements in the social spending of state governments," the statement said.

"There is possibly a mismatch between the demand and supply of state development loans, which can affect the cost of borrowings of state governments in the next five years," it added.

The economists noted that there are indications that suggest that the fiscal deficit to Gross State Domestic Product (GSDP) ratio of the states taken as a whole is gradually declining, after the spike seen in 2015-16 and 2016-17.

Another point of concern raised was the quality of budgeting.

"The quality of budgeting needs to improve. Governments should not budget for a low fiscal deficit, knowing fully well that it cannot be achieved. Projections of revenues from GST is tricky, but not impossible if one can work with the available data," the statement said.

Given the shift from the use of the 1971 population to the 2001 population, some economists pointed towards the need for instituting an incentive structure in devolution. The composition of population in terms of the proportion of the elderly in the population is becoming significantly different across states, the statement said.

Some economists also urged the commission to consider reinstating the system of specific-purpose grants to ensure development of social sectors and other sectors that require hand holding.