New Delhi : Finance Commission Chairman N K Singh on thursday made a case for setting up a "fiscal council" as an institutional mechanism to monitor fiscal consolidation roadmap of the Centre and state governments.He also said fiscal federalism is a dynamic process and 'a Work in Motion'.
Singh was speaking at the launch of the book 'Indian Fiscal Federalism' written by Y V Reddy, who had served as RBI Governor as well as Finance Commission Chairman.Referring to a suggestion in the book, Singh said he too agrees that there should be some mechanism to ensure that basic spirit of devolution process is not undercut by clever financial engineering or taking recourse to traditions that makes it technical and legally tenable but perhaps morally not so.
Emphasising that rules of the game should be same for both the Centre as well as the states with regard to borrowings, Singh said, "for state government liabilities, Article 293 (3) provides a constitutional check over borrowings. But there are no such restriction on the Centre".
"I feel that it is time we have an alternative institutional mechanism like fiscal council to enforce fiscal rules and keep a check on the centre's fiscal consolidation," he said.Singh, who had also served as revenue secretary in the finance ministry, agreed with the suggestion in the book that the Finance Commission as envisaged in the Constitution does not prohibit its continuous functioning except that it has to be re-constituted before the tenure ends every five years.