...Stating this, a working paper of the Reserve Bank of India titled ``Debt sustainability at the State level in India’’ sounded a warning that the contingent liabilities, primarily in the form of issuance of guarantees by the state governments, remained an area of concern. ``The strong presence of contingent liabilities calls for a holistic assessment of debt position of states by reckoning their off-budget fiscal position, including the impact of operations of state public sector enterprises,’’ it said. Going forward, there could be downside risks in case the slowdown in growth......
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Now in the changed context, reportedly, the Planning Commission will have ‘LESS’ work. Time is opportune to entrust the Planning Commission with the following activities on an ongoing basis:
1. Map the nation’s resources including gold and jewllery with individuals and religious bodies.
2. Assess the state-wise contribution to GDP. Metropolitan cities should be treated separately.
3. Track the flow of funds from states to central pool and vice versa and identify the states which are drawing more than their ‘share’ from central resources.
4. Analysis of subsidies, tax waivers, loan waivers and other acts of government which ultimately impact government finances.
5. Planning Commission should do these things in association with organisations like RBI and Income Tax Department which have reliable data/information to make compilation easier.
6. The Commission should make public its findings.
The suggestions are worthy of immediate attention by the GoI. It is also desirable to consider either a separate legislation or as part of the overall legislative reform of financial sector, that all the State Governments be barred from either announcing or implementing the write-off of loans issued by the banks for any category. Even Government of India shall indulge in this compulsive act only under extraordinary circumstances of severe natural calamities affecting various parts of the country from out of a separate Calamity Relief Fund to be set up with participation from the State Governments, NABARD, commercial banks and Insurance Companies. What is uninsurable alone should qualify for such waiver that should be approved by the Parliament.
Several State Governments in their annual Budgets should clearly spell out specifically such write-off amounts issued under a guarantee mechanism or public borrowing facility.
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