Need to revisit Constitutional provisions on federal structure: N K Singh

Fifteenth Finance Commission (15th FC) Chairman N K Singh on Friday batted for revisiting provisions of the Constitution that govern the federal structure through consultative dialogue, amid souring Centre-state relations and the changing economic environment.
 
Singh also called for moving to a fiscal deficit range rather than a specific number to better judge expenditure outcomes of states.
 
At an annual general meeting of industry chamber Ficci, Singh suggested revisiting the provisions relating to subject areas between the Centre and states and centrally sponsored schemes (CSS). He also called for better coordination between the FC and the GST Council and the need for a body to coordinate between the Centre and states after abolition of the planning commission.

 

He said the country’s economic progress, global interdependence and the seamless integration through technology have reopened many of these settled contours for further deliberation.
 
“Are there new seeds of suspicion and mistrust? Are the existing arrangements governing Centre-state relations — legislative, executive and financial — envisaged in the Constitution adequate to meet the aspirations of Indian society?” Singh asked while delivering a lecture on Indian Economy and Reinforcing Federal Trust.
 
He suggested revisiting the VII schedule of the Constitution which divides the subjects broadly into Union, state and the Concurrent list.
 
“Over a period of time the division of functions got increasingly eroded,” the former bureaucrat said.

 
Singh suggested setting up a high-powered committee of domain experts to review this schedule.
 
There is also a need to revisit the entire area of Article 282 of the Constitution which deals with grants for public purpose.
 
The legitimacy of all CSS, which are in the domain of the states, emanates from the use or misuse of Article 282, he said.
 
Based on the internal exercise of the FC, there are approximately 211 schemes and sub-schemes under the 29 umbrella schemes. “Considering that states often protest that these schemes are ill-designed and not suited to their specific needs and entail significant financial outlays by them, no state has really decided to abandon them,” Singh pointed out.

 
Thus, the CSS should be flexible enough to allow states to adapt and innovate.
 
“We also need a far more credible policy for rationalisation of CSS and central outlays than have been possible so far. We need to constitute an Empowered Group of domain experts to submit to the Finance Minister and Prime Minister… on modalities of further and deeper rationalisation of these CSS,” he said.
 
The fact that the total public outlay on these CSS is close to ~6-7 trillion a year cannot be overlooked, he said.
 
Singh focussed on the need for continuity in aligning the fiscal consolidation road map of the Centre and states in a more harmonious way.

 
“A differentiated debt path of states, which recognises the present constraints, and issues of legacy debt must be handled with sagacity and sensitivity. This is more required in times of adversities like the world is facing now due to the pandemic,” he said.
 
The Union government recently allowed additional 2 per cent borrowing for states in July this year based on universalisation of One Nation-One Ration Card, ease of doing business, power distribution and urban local body revenues.
 
Performance and outcome-based flexibility in states for undertaking market borrowing adds flexibility. A fiscal range than a fiscal point based on expenditure outcomes may be the need of the hour, he said.

 
He also emphasised on nurturing trust between not only the Union and states, but with the third tier of government — local governments.