It will be endeavour of the 15th Finance Commission that performance is not penalised and virtues of efficiency and equity are suitably recognised – Finance Commission

West Bengal economy strategically placed, Legacy issues like Debt overhang need restructuring,  should not become a drag on the economy

It will be endeavour of the 15th Finance Commission that performance is not penalised and virtues of efficiency and equity are suitably recognised, reiterated the Chairman of the visiting 15th Fiannce Commission Sh. N.K.Singh in a Press Conference in Kolkata after detailed meeting with West Bengal government. This would be a balancing act while addressing its complex Terms of Reference, he added.

Finance Commission recognizes the significant achievements made by the state govt. in last few years in terms of key macro economic parameters viz. GSDP, debt management, Own Tax Revenue and innovaitve ways of financing. Significant strides in Human development have been made specially in education and health which will have multiplier benefits for the economy. Adoption of direct tax benefit, e-bill payment has got favourable impact on long term revenue.

Notwithstanding the current growth momentum and the new initiatives taken, Shri Singh highlighted the need to consider and examine the legacy issues particularly the huge debt overhang and the need for  structural measures in a manner which does not become a permanent drag on the state economy.

Commission during the detailed deliberation brought out some concerns like low capital expenditure as a percentage of total expenditure. It was assured by the state govt that there has been a substantial enhancement in capital expenditure.

He said that commission has taken a note of the detailed presentation made by the state govt. Commission appreciated the new initiatives taken by the state of West Bengal in the fields of Power Sector, creation of leather hub, a financial hub, more orderly pace of urbanisation, utilising comparative factor advantages which are creating huge employment opportunities. Commission noted that West Bengal economy is strategically placed bordering Nepal, Bangladesh and Bhutan and is a driver economy for many other economies in the vicinity.

State suggests an alternative formula for devolution based on Locational Complexities and Social Backwardness, Demands Revenue Deficit Grant of ₹ 90,136 crores for 2020-25 and Grant for Infrstructure Gap funcing of ₹ 1,46,692 for 2020-25

Chief Minister Ms Mamata Bannergy and Finance Minister Dr. Amit Mitra welcomed the Commission. In their detailed presentations on state finances, officials emphasised on enhancing the devolution to the states, including a criteria of ‘Social Backwardness’ and Locational Complexities like hilly terrain, international border wetlands and population density, continuation of Revenue Deficit grants and state specific fiscal targets, among others.

Finance Minister Dr. Amit Mitra based on his deliberations with CSSO, apprised the Commission that discrepancies related to the macro-economic parameters are expected to be reconciled by August 2018.

The Chief Minister submitted a detailed Memorandum to the Commission. Chairman complemented the Govt. of West Bengal for making an illuminating presentation to the commission regarding the opportunities and challenges in all the sectors of the economy of the state. He also stated that the issues raised would receive appropriate consideration during deliberation in the Commission.

15th Finance Commission which is on a 3 day visit to West Bengal also sought views of the leaders from various political parties, local bodies and representatives from Trade and Industry. They focussed on giving some grant for backward areas in addition to performance grants, infrastructure development and development of Jute Industry.

Commission will also make field visits to IT Park in New Town, Madhyamgram municipality and Kemia Khamarpara gram panchayat on 18th July. Commission appreciated the warm hospitality extended by the State Govt. The Commission also looked forward to continuing interaction with the State Government based on today’s meaningful discussion, as to what more needs to be done to enable West Bengal to become a growth multiplier in the national economy.

The Commission will finalise its recommendations by October 2019 after completing its discussions with all the State Governments, the Government of India and relevant stakeholders.

Fiscal devolution balance: recognise state performance without penalising efficiency while addressing legacy debt and infrastructure gaps. 15th Finance Commission will ensure that performance is not penalised and that efficiency and equity are recognised in fiscal devolution, balancing recognition of state-level reforms and innovative financing against structural legacy issues such as a substantial debt overhang. The Commission noted low capital expenditure as a share of total expenditure and welcomed the state's assurance of increased capital outlay. It also recorded state proposals to include locational complexities and social backwardness in devolution criteria and requests for revenue deficit grants and infrastructure gap funding, and will continue consultations and field visits before finalising recommendations.