Delink Plan from classification in Budget, says Reddy

The FFC also suggested replacing the existing FRBM Act with a debt ceiling and fiscal responsibility legislation, specifically invoking Article 292 in its Preamble.

By: ENS Economic Bureau | Mumbai | Published:March 19, 2015 1:37 am

As the 14th Finance Commission (FFC) has formulated its recommendations without reference to the distinction between Plan and non-Plan, as a follow-up, it is essential to delink the Plan from the classification in budget documents and accounts so that the intended benefits accrue, FFC Chairman YV Reddy has said.

“Such a delinking will facilitate assessment, scrutiny and approval of all expenditures in a sector or activity, or department in a comprehensive manner, and not only incrementally,” Reddy said while delivering a lecture at the Madras School of Economics. It will facilitate greater attention to maintenance expenditures, and hopefully reduce incentives to boost capital works and show large sized plans.

The FFC also suggested replacing the existing FRBM Act with a debt ceiling and fiscal responsibility legislation, specifically invoking Article 292 in its Preamble.

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“This recommendation for formally invoking the Constitution is to accord greater sanctity and legitimacy to fiscal management legislation,” he said in his speech, a copy of which was made available to The Indian Express.

“The provision of some public goods … may attract the attention they deserve. Above all, the planning process will also be liberated from its close association with the budget, reflecting new realities, namely, that the process of development requires significantly more than investments by government … and actions by regulators, private sector and financial markets are at least equally important,” he said.

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