The Alumni Association of the Department of Analytical & Applied Economics, Utkal University, organised its annual lecture series on "Sustainable fiscal policy in India: Post-Pandemic Challenges" on Saturday. Prof Dr M Govinda Rao, former Director, National Institute of Public Finance and Policy and former Member of Fourteenth Finance Commission (2013-14), discussed the limited role of rule based fiscal policy in crisis situations like Covid-19.
This Prof Bidyadhar Misra Memorial Lecture Series is organised by the association every year in the memory of Prof Misra, founder of the department. Prof Rao praised Prof Misra’s academic contributions to research on small industries, tribal development, etc.
He said the Indian economy is currently going through the post-pandemic syndrome in the forms of rising unemployment, reverse migration, disturbances in the production relations and distribution networks. The policymakers both at the State and national levels are finding it difficult to cope with the situations. Prof Rao remained sceptical on the effectiveness of rule-based fiscal policy in its present form.
Lamenting on the burgeoning fiscal deficit, Prof Rao said debt sustainability in India has been a matter of concern for a long time. The levels of deficit and debt have been much higher than the levels seen in the emerging economies. The attempts to control them by implementing rule-based fiscal policy, like in most other countries, have not been successful and the numerical targets on deficit and debt recommended by successive Finance Commissions and taken in FRBM Acts have been observed in their breach rather than compliance. The corona pandemic has brought the issue to the fore once again.
“It is high time that we bring second generation reforms in the existing budget management rules” Prof Rao said.
Along the lines of the 15th Finance Commission, he also stressed on evolving a new fiscal architecture for the 21st Century with three important pillars: (i) fiscal rules across all levels of government towards achieving sustainability; (ii) a scientific public finance management system to provide comprehensive, consistent, reliable, and timely reporting of fiscal indicators that are a part of the fiscal rules; and (iii) an independent fiscal institution namely “The Fiscal Council” to assess and advise on the working of the first two pillars.
The memorial lecture ended with remarks by alumni association president Dr Subhas Kumar.