Need alternatives to farm subsidies: Study released by Finance Commission

The 15th Finance Commission, which is expected to submit its interim report this week, recently released a host of independent studies and analysis commissioned by it. The findings from the studies could form as inputs in the Commission’s final reports. The studies were done by the Institute of Economic Growth (IEG), the Indian Council for Research on International Economic Relations (ICRIER), Xavier University, Bhubaneshwar, the Indian Statistical Institute, Delhi, and NCAER among others. Following is a sum-up of some of the studies:

Agricultural subsidies 

Governments need to explore alternatives to price subsidies, as they have become inefficient overtime. Procurement-based support could be replaced with price deficiency payments, but in the medium-term, they become difficult to manage, direct benefit transfers offers solution, but the up-front cost is high.

PM-JAY (Ayushman Bharat) 

If PM-JAY is scaled to actually cover 40 per cent of the population, significant sums of Budget need to allocated for the scheme. Analysis shows total costs (Centre and states) of the scheme for five years, on the assumption that all beneficiaries targeted, are actually covered, could range from Rs 28,000 crore to Rs 74,000 crore in 2019 and go up to between Rs 66,000 crore and Rs 160,089 crore in 2023.

Pay Commission 

The pension bill for the next 10 years due to 7th Pay Commission could be around Rs 3.6 trillion, while the salary expenditure could be Rs 10-12 trillion. The fiscal deficit will worsen for all states.

Municipal Finances 

The Commission should initiate recommending increasing the ration of municipal revenue to GDP from its current level of 1 per cent to 2 per cent in 2024-25.