Focus on 'general govt' to attract global investment: Ex-finance panel head, Pg8

Key Highlights:

• NK Singh, former chairman of the 15th Finance Commission, emphasized the importance of aligning the economic interests of the Centre and States for India's economic growth.
• Singh highlighted that global investors focus on the fiscal discipline of the “general government” (Centre and States combined).
• He noted that while China and India had similar economic sizes until 1980, China's per capita income was approximately 5.5 times India's by 2023.
• Singh advocated for incentivizing states to adopt the 2017 FRBM amendments to maintain fiscal discipline.

Detailed Insights:

• Cooperative federalism and competitiveness-driven growth are crucial for sustaining India's long-term economic momentum.
• The FRBM Act adoption in 2003 saw states enacting their own fiscal responsibility acts, but the 2017 amendments were not widely adopted by states.
• Mainstreaming states into fiscal discipline requires incentives and consequences that reward prudence and discourage profligacy.
• Debt will be the principal fiscal anchor of the central government in the forthcoming budget, as stated by Finance Minister Nirmala Sitharaman.
• China's economic outperformance compared to India is attributed to India's historical approach of treating trade as something to be rationed.

Key Concepts Involved:

• Fiscal Deficit: The difference between a government's revenue and its expenditure.
• Cooperative Federalism: A system where the central and state governments collaborate to address common problems.
• FRBM Act: The Fiscal Responsibility and Budget Management Act, aimed at ensuring fiscal discipline and reducing the fiscal deficit.