Augmenting fiscal capabilities

Quality of expenditure should sway fiscal transfers

The latest annual study of state government finances by the Reserve Bank of India (RBI) has made some valid recommendations to the 16th Finance Commission (FC XVI), while outlining the fiscal capacities and revenue dynamics of the states. The Union Cabinet recently approved the terms of reference for FC XVI, though the names of its members and chairperson are still awaited. As a measure to augment states’ tax collection and improve the institutional strength of their revenue departments, the central bank has advised that the Finance Commission examine and reinstate some of the fiscal efficiency parameters. The RBI has also