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Finance Commission blames competitive populism for deficits, moots 'big and bold' remedies

The 11th Finance Commission proposes to recommend ''big and bold'' steps in order to check the tendencies of political parties who had adopted populist measures without caring for financial discipline and have depleted the national and states' resources available for investment and development.

Commission's chairman Prof A M Khusro said in Ahmedabad on Friday that competitive populism had turned many of the surplus budget states like Goa and Gujarat, into deficit ones during the last few years.

He stated that it was one of the major reasons for budgetary deficits in the states. Without a national political consensus on this issue and urgent steps, it was very difficult to check this tendency.

Professor Khusro pointed out that the commission was now ''hell bent'' on not coming up with small measures and matters. ''We want to make some big and bold recommendations. We will not be scared to do so as our aim is make the Centre and the states financially sound and realistic.''

Saying that effective measures should commence at the Centre, Professor Khusro pointed out that short-term doling of incentives in a competitive manner had reduced the volume of resources available for investment, infrastructural development and maintaining long-term financial discipline.

The commission, which came to Gujarat on a five-day visit on Wednesday, met a number of delegations representing different organisations and political parties. The state government officials also held meetings with the commission and submitted their memorandum of demands.

The chairman said while the commission favoured ''merit-based'' subsidies, like those provided for keeping lower the prices of essential commodities and cost of education, it did not favour subsidies in ''non-merit based'' sector. Citing example of Indonesia, he said this southeast Asian country recently phased out such subsidies, over a period of time, by slowly allowing an increase in price-levels.

Replying to a question about the gujarat government's demand for compensation against an annual loss of revenue worth Rs 8.5 billion due to continued imposition of prohibition policy, the commission chairman said it was the state governnment's decision to ban liquor consumption and the responsibility for a loss on this account should also be borne by it.

In any case, the policy had already benefitted the state's people by keeping low the crime rate and improving social conditions, he said.

He disclosed that the Tekchand Committee of the early 1960s, of which he was also a member, had recommended rationalisation of liquor policy, not prohibition, in Gujarat, as a means to check consumption of liquor and, at the same time, generate some revenue.

He said the commission, which toured Goa before coming to Gujarat, will complete its work later this year and make recommendations to the Centre. ''Since the panchayats and municipal bodies are now the third tier of government, not institutions any more, we have a new responsibility to provide them with funds. Restructuring of Central and state finances was urgently needed," he added.

UNI

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