EFC on States' Fiscal Reform : One-Sided and Impractical

While the Eleventh Finance Commission (EFC) did not itself draw up a state-specific fiscal reform agenda, it has gone to some length in working out and suggesting the lines on which fiscal reform at the state level could be undertaken and that too under the direction and supervision of an agency to be established by the centre as part of the monitorable fiscal reform programme designed by the commission.

The EFC has suggested the establishment of a monitoring agency in every state comprising, among others, representatives of the Planning Commission, the central finance ministry and the concerned state government. This agency will be expected to draw up a state-specific fiscal reform programme (FRP), with the aim of reducing the state’s revenue deficit with equal emphasis on revenue mobilisation and non-plan expenditure compression. The state’s efforts at revenue mobilisation and expenditure compression would be monitored by this agency as per the broad norms recommended by the commission.