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Finance Commission mandate based on suggestions from states: Finance secretary TV Somanathan

New Delhi: The union government kept the terms of reference of the 16th Finance Commission short and direct, and gave the Constitutional body the complete freedom decide on devolution of funds based on suggestions from states, finance secretary TV Somanathan said on Thursday. Somanathan added that the government held extensive consultations with the states and was sensitive to their suggestions.

Responding to a question on why expenditure reforms at the state level to improve their financial health were not mentioned in the terms of reference, Somanathan explained that some states had urged the union government to not include any additional terms that they feared could impinge on their fiscal autonomy. 

“I am sure that the commission will take into account all relevant considerations and will reach an appropriate conclusion. The central government is very sensitive to cooperative federalism and take states’ views very seriously,” Somanathan said.

He added that the terms of reference released on Thursday were final, although shorter than those of many recent Finance Commissions. One could argue that less is more, and that the terms actually give the commission more leeway to take inputs and recommend an award that is within the Constitutional framework, the finance secretary explained.

In response to another question, he indicated that the appointment of a chairperson and members of the commission was imminent. He added that to his knowledge, there was no legal bar on someone being a member of two different commissions.

On a question about the government’s fiscal deficit, he said nothing has happened so far to change the assumption that the government will end the year with a fiscal deficit of approximately 5.9% of GDP. “We will adhere to fiscal targets,” Somanathan said, adding that the recent extension of the free food-grain programme won’t throw the government off its projected path.

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Updated: 01 Dec 2023, 09:53 AM IST

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