Junior finance minister rules out setting up of independent fiscal council

Razorpay witnessed a spike in co-working space spending of 245 percent in transaction terms while the number of payments made for cab services grew seven times during the financial year 2023.

The government does not propose to set up an independent fiscal council consisting of experts, the minister of state for finance told the House on February 13.

“Institutions such as the Comptroller and Auditor General of India, the Finance Commission, etc. perform similar functions,” Pankaj Chaudhary said in a written response to a lawmaker’s question whether the government proposes to set up an independent fiscal council as suggested by the committee on fiscal responsibility and budget management.

About 50 countries have fiscal councils, which act as budgetary watchdogs, raising the reputational and electoral costs of undesirable policies and broken commitments by governments. These councils assess the sovereign’s budget plans and performance, evaluate macroeconomic and budgetary forecasts, and monitor the implementation of fiscal rules, according to the International Monetary Fund.

In India, successive Finance Commissions have recommended the formation of a fiscal council but the governments have rejected the proposals.

The making of a fiscal council with powers to access records from the Union and state governments was one of the key recommendations of the 15th Finance Commission. The commission said there were institutional gaps in the production, collation, coordination and publication of fiscal data, as well as an independent review of fiscal projections and the medium-term budgetary framework across all levels of government.

Also read: Why India needs a fiscal council

In September 2022, Finance Minister Nirmala Sitharaman has shrugged off the suggestion for setting up of a fiscal council.

The coronavirus pandemic has shown India's institutions can rise to the occasion, she had said, batting away suggestions that a fiscal council was needed.

"I just want to flag this debate about newer institutions. Newer institutions which will have to start the trial of standing up to challenges, older institutions which got activated during the pandemic, and the powers vested in the Constitution which are invoked by the finance ministry are all before us to see as to how India has effectively used them and continues to use them to get the economy on its toes," the finance minister had said.