There is a need to empower states in fiscal matters to achieve co-operative federalism, according to Rathin Roy, Director of National Institute of Public Finance and Policy.
Roy was delivering the Mohan Kumaramangalam Memorial Lecture on ‘India’s Marco-Fiscal Bind: Can Co-operative Federalism be the Answer?’ at the Administrative Staff College of India here on Tuesday.
Citing data, the economist said States were “behaving more responsibly than the Govt of India” with regard to fiscal deficit, contrary to the popular perception that there were irresponsible in fiscal measures in view of populist measures.
“Let it be the colour TV scheme of Tamil Nadu Chief Minister Jayalalithaa or other programmes of Mulayam Singh and Nitish Kumar, the States are still able to manage their fiscal issues better,” he said.
The empirical data also disproved the view that improvement in States’ finances in the last 10 years was due to central fund transfers, he added.
“States are now investing more than the Centre with higher capital expenditure to Gross Domestic Product ratio. For example, a State like Bihar is investing 4.2 per cent while it was only about 70 basis points,” Roy said.
Hence, fiscal empowerment of states and adopting of co-operative federalism could provide solutions to challenges in public finance, he added.