PRESIDENT INAUGURATES GOLDEN JUBILEE
CELEBRATIONS OF FINANCE
COMMISSION
The President of
India, Shri A.P.J. Abdul Kalam today outlined a vision of connectivity
and transparency in governance and administration to bring about
the development of the nation. He said that connectivity has four
aspects which are fiscal connectivity, knowledge connectivity,
electronic connectivity and economic connectivity which can lead
to empowering the rural people and bringing about economic development.
The President was inaugurating the Golden Jubilee function of
the Finance Commission in New Delhi today.
Presiding over the
function, the Union Finance Minister, Shri Jaswant Singh said
that the country has achieved significant economic progress during
the five decades after Independence. He said both the Finance
Commission and the Planning Commission were pillars of the economic
and financial federalism achieved in the country. Underlining
his faith in the potential of the economy to achieve high economic
growth, the Finance Minister said that India has demonstrated
a unique economic and political resilience. He said that India
is a continental economy and in many ways a unique common market.
The Minister expressed concern over the revenue deficit and said
that this must be addressed urgently.
In his address, Shri
K.C. Pant, Deputy Chairman, Planning Commission said that two
important issues that of regional disparities and macro economic
stability with high quality growth need to be addressed in the
context of fiscal federalism. He said that the economic and social
development of the country had not been uniform and the trends
indicated a growing polarisation. He said that the concerted efforts
are being made to implement equalization measures without giving
the wrong signal that lack of state effort for fiscal discipline
will be ultimately rewarded with more resource transfers. Shri
Pant also underlined the need to bring about significant improvements
in the levels of governance which are the key elements of efficiency
resource utilization. He said as we move towards decentralisation
with the 73rd and 74th constitutional amendments,
the institutional and social underpinnings necessary for decentralization
to succeed are sti! ll not fully in place.
In his welcome address,
Dr. C. Rangarajan, Chairman, Twelfth Finance Commission said that
every Finance Commission has addressed issues relating to the
correction of vertical and horizontal imbalances of the state
and the central resources. He said that transfers to states through
the Finance Commission in gross revenue receipts have remained
on an average around 24 per cent in the last decade. However,
there is concern that these transfers have shown a decline as
a proportion of the GDP during recent years. The Chairman said
that the task of designing a fair and robust scheme for fiscal
transfers has become progressively more demanding in India as
both the Centre and the States have continued to nurse mounting
deficits on their revenue accounts alongwith increases in overall
fiscal deficit on the economy. He said that this can set in motion
a vicious cycle which could impact growth rate and have serious
balance of payments implications.
Underlining the fact
that finances of all state governments are under strain, Dr. Rangarajan
said that every state has to address the issue of how to contain
fiscal deficit within reasonable limit while meeting their responsibilities.
He called for raising revenues including the non-tax revenues
and pruning the under non-developmental expenditures. He also
urged for developing a consensus on user charges on services such
as power, transportation and municipal services. He said that
while these cannot follow a simple formula, efficiency norms must
be imposed by a regulatory authority.
Outlining the core
responsibility of Finance Commission, Dr. Rangarajan said that
in designing a suitable scheme of fiscal transfers, three considerations
seem relevant – needs, cost disability and fiscal efficiency.
These must be balanced by equity considerations which aim to ensure
the provision of selective services at minimum acceptable standards
across the country. He said that states which perform very efficiently
in the delivery of services or raise more revenues relative to
their tax bases should not be penalized.
The Golden Jubilee
celebrations of the Finance Commissions will be held over two
days in which State Finance Ministers, Finance Secretaries of
the States and senior officials of the Central and State Governments
are participating.
