FM Sitharaman shrugs off proposal for fiscal council, cites resilience of Indian institutions

Finance Minister Nirmala Sitharaman (File Image)

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

"I find a very powerful case being made for a fiscal council (in this book), which is not new," Sitharaman said in the Capital.

The finance minister was speaking at a panel discussion at Delhi School of Economics at the launch of the book Relicabrate: Changing Paradigms, co-authored by NK Singh, chairman of the 15th Finance Commission, and PK Mishra, principal secretary to the prime minister.

In the book, Singh called for the constitution of a fiscal council – recommended numerous times before by several committees, including the Singh-led 15th Finance Commission. However, Sitharaman batted away the suggestion, saying the current set of institutions were functioning and had helped rescue the economy.

"During the pandemic and with good guidance from the entire cabinet secretariat, PMO (Prime Minister's Office), finance ministry, the 15th Finance Commission...a lot of interaction happened," the finance minister said.

"This pandemic stands before us as an example, not just for us but world over there is a recognition that India managed to come out of (the pandemic) - there is of course a lot more work to be done, I am not saying it's concluded. But the pandemic has shown the world that India's institutions can rise to the occasion even if it's a Black Swan (event) and address the stress points of the economy and we could build on and give impetus to growth," she added.

Further, newly-formed institutions also need time to settle down, Sitharaman said, taking the GST Council as an example.

"We have not had the GST Council having its full-fledged, well developed, it-is-all-settled-and-its-running kind of situation yet. After all, (it has) only (been) five years. But we again find NK Singh speak on the need for the GST Council and the Finance Commission to have a better coordination through another institution," Sitharaman said.

In its report, the 15th Finance Commission had called for the establishment of an independent fiscal council to provide multi-year macro-economic and fiscal forecasts and evaluate the fiscal performance versus targets across levels of government, among other responsibilities.

In her remarks today, Sitharaman said institutions which had not got the opportunity to be fully invoked or respond to developing situations had all risen together and worked during the pandemic.

"So 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."