NK Singh, Chairman, 15th Finance Commission, has visited and consulted nearly half the number of States in the run up to giving recommendations on distribution of taxes between the Centre and States for the period 2020-25. He says development as a focus of governance is something that is common across the States despite political differences. The biggest challenge the Commission faces when it submits its report to the President in 2019 is to reward performing States while, at the same time, helping the laggards, he told BusinessLine in an interview on a wide range of issues. Excerpts:

What has been the common theme among the States you have visited?

There is greater optimism from enhanced rates of growth each State is encountering. There is an increasing focus to make development a central focus, which is a unique learning experience. There could be political issues but development as a focus of governance is a commonality which I observed in all the 15 States.

States like Tamil Nadu have flagged concerns about using 2011 census data as Terms of Reference (ToR). Your comments on this..

This Commission is bound by the Presidential notification. We did not draw the ToR that is given to the Commission. The ToR also says to suitably reward States that have achieved greater demographic management. It is left to us to find ways to be assigned to population. The previous commission chose to use 1971 and 2011. It is this Commission’s endeavour that performance must be recognised and efficiency must be rewarded, and at the same time issues of equity also need to be suitably addressed. Harmonising efficiency and equity is a continuous challenge and it will be this Commission’s endeavour to try and seek an appropriate balance. We will make our recommendations to the President by October or November next year.

What could be the impact of GST on the Commission’s recommendations ?

Excise duty is now merged in to GST. We have to recognise the limitations of States on the issue of revenue. We are undertaking, in close interaction with the Revenue Department, on what would be realistic and robust projection on GST numbers. We need to make assumptions on tax buoyancy as GST tax has undergone tremendous changes. There is no finality as these are not the final rates, and could undergo changes. We want to seek robust data for a few quarters to make our projections. This Commission awaits more detailed presentation by the Revenue Department at the end of this fiscal for GST numbers.

Governments are using populist measures like freebies and loan waivers ? How does this impact finances ?

So far, we have not seen any evidence to enhance public outlays in a manner which will be incongruent to the commitments of fiscal deficit target and this government should take credit for adherence to the broad path of fiscal rectitude. This (Union) government, both by its track record and its behaviour, has proved that it is likely to respect the issue of broader macro economic stability in which fiscal deficit and debt trajectory are the two centrepiece.

What about the States?

Some States have high debt while some have legacy debt, which is a problematic issue. Some States say why hold us responsible for debt incurred by the previous government. On the flip side, because governments are in perpetuity, successive government need to take on the obligation of the previous governments. This is what a democracy does.

Do you think the RBI and Finance Ministry spat should have been avoided?

We (15th Finance Commission) are a constitutional body and we will not be able to comment on this issue. The Finance Ministry and RBI will, hopefully, sort it out among themselves.

Your comments on the new GDP back data series...

The GDP figure is something for the Finance Ministry to comment on. Moreover, it is the Central Statistical Organisation, which is the principal organisation, and the NITI Aayog to sort it out and to bring out the best estimate possible.

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