Raising resources for schemes by governments through borrowing might be tempting, but it has to be weighed with the realities as raising money is as important as managing debt, Union Finance Minister Nirmala Sitharaman said on Tuesday. Sitharaman also said when it comes to finances of the country, whether the finances of the central government or of the states, there should be no politics over it.
Launching “NITI-NCAER States Economic Forum” Portal, Sitharaman said data for states’ finances is often viewed with a certain sentiment: “Who has put it out? Is it against me? Is it for me? Facts, notwithstanding. We’ve had this quite often in the Parliament where data put out by the Union Government itself is questioned saying: are you being objective?” The portal will help officials to grasp everything about states’ finances and help states to make more meaningful interventions, raise revenues, manage debts and learn from peer experiences, she said.
The portal by NITI Aayog and NCAER is a repository of data on social, economic and fiscal parameters, research reports, papers, and expert commentary on state finances for a period of over 30 years (1990-91 to 2022-23).
Sitharaman said countries have become so debt ridden and it is going to take a generation for them to reach acceptable levels of debt. “It’s one thing to say, we are good in growth. We are the fastest-growing economy and so on all over the world. If there is a struggle to become a faster growing economy, equally, there’s a big struggle to contain your borrowing. Countries have become so debt ridden and it is going to take a generation for them to even come to acceptable levels, leave alone ideal levels. It’s not for want of data, they know it,” she said.
The sense of handling public finance with a certain balance is that you need the revenues, but you also have to be careful, she said. Borrowing has to be weighed in with all the realities in front of us, she said.
“There is no good if I am being very good in terms of giving projects for or schemes for the public, very compassionate, very inclusive, but you don’t have the resources for it. Equally, it’s also very tempting to keep borrowing…when you think in terms of, oh, I don’t have the resources, but I need to borrow. That borrowing equally will have to be weighed with all the realities in front of us,” she said.
States may be differently endowed but the fundamentals of finances are the same for them. “It is not just coming back to power next year or the next fourth year. But are you leaving the state better off or worse off? And that irrespective of party, all of us will have to have some responsibility when we deal with public finances. Each state is unique, but when it comes to finances, the fundamentals cannot be different. So this states’ economic forum, with all the data dashboards, is going to give that opportunity for officials to at least grasp everything,” she said.
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A state’s debt-to-GSDP cannot be three times more than its GSDP. “And some other state cannot constantly do a fantastic job of it and then stand out as a good performing state. The fundamentals ultimately are the same. That’s why I said, when you’re talking about public finances, there cannot be politics,” she said.
Giving an example of the discussions held in the GST Council, Sitharaman said there are no differences between a BJP-ruled state or a Congress-ruled state as everybody wants to raise revenues. “There is no difference on that. Punjab, doesn’t speak differently from Gujarat. Gujarat doesn’t speak differently from Tamil Nadu. Everybody wants to raise revenue,” she said.
But, equally we have to be sure we don’t burden the people, she said. “In the GST Council, everybody says money. But they’re conscious that it cannot be by burdening on certain items which are of daily use for common people. So, through the GST Council, we are able to prove the hard look, actually, the realistic look,” she said.
So, similarly, Sitharaman said she expects the NITI NCAER States’ Economic Forum to have that kind of an impact. “Data tells you hard truths. Something which is difficult to gulp. States which call themselves developed are ridden with huge debts…get them on board. Let them see what is before them. Let them see how other states are managing. One might want to see how other states are managing that, but the second one would want to see how their per capita income is rapidly growing and what is it that they have to do…make sure the states understand the importance of such data,” she said.