The country's GDP growth fell to an over six-year low of 5 per cent in the first quarter of the fiscal.
The Finance Commission is not “obliged” to go by the government’s growth projections and will arrive at its “own independent judgement” while finalising formula for devolution of funds to states by the Centre for five years commencing April 1, 2020, said its Chairman N K Singh on Friday.
The 15th Finance Commission is scheduled to submit its report to the government by November 30.
Talking to reporters after a meeting with its advisory council comprising economists, Singh, a former revenue secretary, said the Commission has already brainstormed with the central government and its ministries, and most of the state governments.
However, with respect to Jammu and Kashmir, he said a reference will be made by the President of India only after October 31, the date on which the state would split into two Union Territories — Ladakh and Jammu & Kashmir.
He admitted the Commission would have little time as it is scheduled to submit report by November-end. He, however, did not reply if the Commission would seek extension of its term beyond November.
As regards the gross domestic product (GDP) projections, Singh said that during the meeting, economists presented a “mixed opinion” on growth prospects and were divided if the slowdown was just a blip or would continue.
The country’s GDP growth fell to an over six-year low of 5 per cent in the first quarter of the fiscal.
Singh said he cannot be oblivious to what economists said during the meeting.
“I am not obliged, the Commission is not obliged to accept the numbers on the nominal GDP as submitted to the Commission either in the cental government memoranda of understanding (MoUs) or as contained in the medium-term fiscal policy statement presented to Parliament,” he said.
The former bureaucrat further said the Commission is duty-bound under the Constitution to arrive at its “own independent judgement”.
“How we intend to exercise that is entirely up to us. But, the fact remains that between the time…say six months ago and now the numbers on the nominal GDP look more problematic.
“The best case scenario is that the first quarter is just a blip and the subsequent quarters will work out to be somewhat better,” Singh said.
“So, I cannot prejudge on that but I have to certainly take all these into account and I come to a conclusion and project a number,” he added.
Singh said the Commission had detailed discussions with the Reserve Bank of India (RBI), which had its own methodology to calculate macroeconomic numbers, as well as other institutions. He also said the Commission does not have the “luxury of time and space” to seek views of more outside experts and rating agencies.
When asked about stimulus to the economy as being demanded by certain sections of the industry, Singh quipped, “Where is the fiscal space”.
He further said the fact remains that the government is acting with alacrity in terms of taking decisions, which are appropriate to address the situation and “there are no lack of either intent or determination in implementing measures” which would bring about a much faster improvement in the growth momentum.
Singh also said he would hold discussions with the GST Council, which comprises state finance ministers and headed by Union finance minister, on September 20 in Goa to discuss the issues concerning revenue from the goods and services tax (GST).
This time, the Commission’s report would be in four volumes.
Meanwhile, an official release said advisory council members were updated by the Commission regarding the progress made in terms of state visits by the Commission, upcoming consultative meeting with the GST Council and interaction with other experts.
The possible macro assumptions for the Commission’s award period related to real growth, inflation, etc., were discussed in detail.
Issues related to GST and rationalisation of centrally sponsored schemes were also came up for discussions and views of the economists were sought.
The advisory council will meet again before the submission of the Commission’s final report.
The council’s members who attended the meeting include D K Srivastava, M Govinda Rao, Indira Rajaraman, Sudipto Mundle, Omkar Goswami, Arvind Virmani, Surjit Bhalla, Prachi Mishra and Neelkanth Mishra.