15th Finance Commission will need to define populism

The 15th Finance Commission, set up to recommend the devolution of central pool taxes to states as well as a fiscal consolidation roadmap for government finances, will require to define what constitutes a "populist" measure in order to fulfil its terms of reference, Commission Chairman NK Singh said on Wednesday.

At an interaction here with editors along with some members of the Commission, including former Economic Affairs Secretary Shaktikanta Das, the Chairman also pointed out some unique terms of reference of the current Finance Commission arising from the abolition of the Planning Commission and the roll out of the Goods and Services Tax (GST) last year.

"The 15th Finance Commission will recommend on creating measurable monitoring criteria on states' performance on parameters like ease of doing business, on government programmes like Make In India and populist policies," Singh said.

"For this work, for instance, the Commission has to define what is populism, or what constitutes a populist measure."

Critics point to the increasing use of promises of free power by politicians or distribution of gifts during election time and loan waivers by states as populist measures.

The Chairman also said that GST had completely changed the taxation landscape and had led to the creation of the supremely federal institution of the GST Council, that was a unique element in its terms of reference.

"The GST has altered many parameters and the Finance Commission will have to take that into account," he said.

He, however, added that the lower collections of the first year would not yield accurate data for assessing the impact of the new indirect tax regime.

Singh said that among their terms of reference are "revisiting the terms of the 14th Finance Commission" -- recommending raising the states' share in central taxes to 42 per cent from 32 per cent -- which has been implemented from fiscal 2015-16.

As per a Finance Ministry statement earlier: "The Commission shall take into account the responsibility of the Central and state governments to adhere to appropriate levels of general and consolidated government debt and deficit levels, while fostering higher inclusive growth in the country."

It may also examine whether revenue deficit grants be provided at all, it added.

The Commission has invited suggestions from the public by June 30, 2018. Set up in November 2017, the 15th Finance Commission is supposed to submit its recommendations by October 30, 2019.