FinComm suggests new path for fiscal consolidation: Kelkar

The Finance Commission, which makes recommendations on sharing of tax revenues by the Centre and States, has suggested a new path for fiscal prudence in its report submitted to President Pratibha Patil today.

"We had been asked to suggest new path for fiscal consolidation... We have recommended fiscal path for the next five years (2010-15)," Finance Commission Chairman Vijay Kelkar told reporters at his office.

The government had last year consigned the Fiscal Responsibility and Budget Management (FRBM), the self-imposed fiscal prudence guidelines, to the backburner when it stepped up official spending beyond its means in order to insulate the economy from the global financial meltdown.

Fiscal deficit, a reflection of government borrowings, is estimated to touch 6.8 per cent in 2009-10, up from 6.2 per cent in the previous fiscal, mainly on account of the stimulus measures. 

The recommendations of the 13th Finance Commission, Finance Minister Pranab Mukherjee said, "would be getting reflected in the 2010-11 budget (to be presented in the Lok Sabha in February next year)."

The report, Kelkar said, "...dealt with sharing of tax revenue between centre and states, distribution of funds among states and support to local bodies."

The Finance Commission report assumes significance in view of the ongoing reforms in indirect and direct taxes, which will have a bearing on the tax collections.