Worry about state of finances: Need to focus on resources management
We must worry about state finances
“ The Reserve Bank of India’s annual study of the State budgets (which is the primary source for disaggregated State-wise fiscal data) released earlier this month has highlighted three important factors which will guide the finances of the State governments in the medium term. These are Goods and Services taxes (GST), greater devolution of resources through statutory transfers from the Centre, and adherence to rule-based fiscal policy. The undertone of the RBI study reflects cautious optimism with a focus on GST, which has been termed as a ‘game changer’ for India.”
This refers to the article “We must worry about state finances” (Business Line, May 30). The analysis by Pattnaik and Jagdish Ratnani gives deep insight into the need for GOI having closer liaison with managers of state government finances if they do not want to abruptly land in a situation similar to the one now the Indian Financial Sector has arrived due to neglect of stress in asset management by banks.
Nation's resources under the present dispensation are managed by GOI, state governments and private sector comprising corporates and cooperatives.
There has to be harmony in approach and consensus on priorities among these agencies, the responsibility for ensuring which squarely lies on Central Government. Put bluntly, GOI need to play leadership role in the management of country’s resources.
Without understanding the role expectations from various agencies, ignorant veterans like former RBI Deputy Governor K C Chakrabarty will lament about inadequate guidance from Reserve Bank of India or regulations not being rule based and RTI activists will chase obsolete records dumped somewhere.
GOI, now preferably through NITI Aayog, should guide finance ministry at the centre, state governments and other organizations including banks and corporates which source funds from public to put in place an Asset-Liability Management system, keeping in view the short-term, medium-term and long-term resources needs and remunerative deployment of resources mobilized.M G Warrier