Governments around the world seldom comply with fiscal rules and some sort of market discipline needs to be considered to ensure some accountability for countries, Fifteenth Finance Commission chief N.K. Singh indicated, terming these as important issues that need to be mulled over globally and in India.
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“Normally, compliance to fiscal rules is far from encouraging. Can we integrate market discipline in the design of fiscal rules? Ultimately, the important issue is that of accountability. Can market discipline embedded in sovereign spreads serve as an accountability mechanism?” Mr. Singh noted.
Speaking late Saturday after he was bestowed with the TIOL Fiscal Heritage Award by former President of India Ram Nath Kovind, Mr. Singh emphasised the need to combine fiscal prudence with growth.
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At the same time, he signalled that debt raised for infrastructure investments that facilitate long term growth may be treated differently instead of a one-size-fits-all approach to determine fiscal deficit levels. He also wondered if fiscal norms should have greater thresholds for the additional financing needs of countries to make the transition to renewable energy.
“Does the use of Artificial Intelligence or AI offer technological breakthroughs for real time data which would make cyclically adjusted deficits possible in a time frame necessary for the recalibration of policies? How would quality of expenditure and expenditure outcomes impact the fixation of fiscal norms?” he asked.
He also stressed that fiscal deficits cannot be discussed without considering revenue and revenue buoyancy. “There is a symbiotic relationship to taxes, tax reform and enhanced rates of economic growth,” Mr. Singh remarked.