States to play important role in fiscal freedom: Y V Reddy

Chairman of 14th Finance Commission Y V Reddy today said that state governments would have an important role to play in the fiscal freedom as accorded by the recommendations made by the Commission.
"The recommendations made by the Commission may bring a change on the fiscal relations between the Centre and state. But, being closer to people, the state governments have an important role to play that has been accorded to them by the Commission...", Reddy said while delivering the Raja J Chelliah Memorial Lecture at Madras School of Economics here.
Underlining the need to examine the "quality" and "credibility" of the fiscal management between the Centre and state governments, Reddy, who also served as the RBI Governor, said, the relations between government and public institutions need to be treated with a fair manner so that they remain accountable.

He said there has to be clarity on the jurisdictions laid out between the Centre and state so that healthy relations prevail between them.
At a time when the Centre focuses on fiscal consolidation, the state governments will have a "critical role" to play in maintaining the growth momentum, he said.
The Centre recently accepted the recommendations of the Commission which had recommended an increase in states' share in central taxes to 42 per cent.