NEW DELHI: The economic advisory committee, has suggested the fifteenth finance Commision, to take nuanced approach towards tax devolution to the states, given the uncertainty over revenue collection.
“The Finance Commission is faced with an unprecedented situation of uncertainties and will have to take a nuanced approach towards tax devolution to the States, other transfers, financing of expenditures in the midst of revenue strains including through borrowings and the path of fiscal consolidation, “ FFC said in a statement after meeting with its advisory council on Friday.
However, sources present in meeting said that there was no consensus over the issue of compensation to the states in the current fiscal. The Commission took note of all the suggestions discussed. The Members of the Council also felt that the Commission will have to think unconventionally, especially in treating the five years at hand from 2021-22 to 2025-26.
“They advised that the base year 2020-21 and the first year of 2021-22 may need to be viewed differently from the remaining four years when the revenue situation is likely to improve gradually,” it added. The Advisory Council also flagged their concern on mounting debt. “The general government debt relative to GDP is likely to increase steeply in the initial years, however, the purpose should be to endeavour to bring it down in the subsequent years.
In the initial years, this ratio will be affected by the increased revenue-expenditure imbalance on the numerator and the downward pressure on GDP on the numerator, “ the council noted. The meeting, chaired by NK Singh, was attended by all members of the Finance Commission and other officials. Another meeting with a separate set of experts is scheduled on Saturday.