Grappling with precarious finances

The financial condition of Andhra Pradesh has been in the news for long due to its precariousness. There have been allegations and counter allegations over the same as to who mismanaged the same and led it to the brink.

The ruling dispensation has been putting the onus on the previous TDP rule and the latter blames the existing rule. The residuary State of Andhra Pradesh started off with a disadvantage due to bifurcation, running up a whopping revenue deficit.

Though several provisions have been made in the AP Reorganization Act, 2014 and many promises made even on the floor of Parliament, all that had turned out to be a lip-service and AP had been put to a disadvantage even in the release of promised funds for the developmental works including its sanctioned national project, Polavaram.

The TDP is demanding that a fiscal council be put in place to check the alleged misuse of funds and bring in financial discipline. Former Finance Minister Yanamala Ramakrishnudu has been often insisting on it citing the suggestion made by the N K Singh-led Fiscal Responsibility and Budget Management Committee to set up an independent Fiscal Council consisting of experts to assess and advise on the government's spending and fiscal policies.

Of course, Singh's suggestion was to the Centre. But, the Centre had been categorical in ruling out the same on the grounds that it would only be redundant. In a written reply in Parliament, the Finance Minister said in last December that "Institutions such as the Comptroller and Auditor General of India, the National Statistical Commission, Finance Commission, etc., perform some or all of the roles proposed by the FRBM Review Committee to the Fiscal Council," giving the reasons for not accepting the FRBM panel's recommendation. The AP government cites the same to maintain that there is indeed no need to have such a fiscal discipline committee at the State level.

The FRBM panel, which submitted its report in January 2017, had suggested that the Council be an autonomous body that would report to Parliament.

The Fifteenth Finance Commission (also headed by Singh), the Fourteenth Finance Commission and the Thirteenth Finance Commission had also recommended creation of such a body. In India, despite the recommendations of successive Finance Commissions and other bodies to go in this direction, progress has lagged. As a result, institutional gaps have persisted in the production, collation, coordination and publication of fiscal data, as well as in independently reviewing fiscal projections and the medium-term budgetary framework across levels of government. This was admitted by the 15th Finance Commission, too.

The FRBM panel had suggested that the Centre aim for a fiscal deficit of 3% of the GDP for three straight years starting from FY18 and gradually reduce it to 2.5% by FY23 and partner states in adhering to fiscal discipline. Financial discipline is always good for any country. Yet, our politics and the brinkmanship inherent to it force our politicians to brush aside disciplinary concerns in every aspect. Be it the Centre or the States led by the regional parties, there is little scope for honest policies that would be good for the country in the long run. YSRCP or the TDP are two sides of the same coin.