Weak Local Data Weakening SFC Reports, Indicts 16th Finance Commission: CEA
Nageswaran also pointed out that some concerns are raised by successive finance commissions over the poor quality of SFC reports, particularly the latest panel: Reports
NEW DELHI: Flagging concern over state finance commission’s suggestions, chief economic adviser (CEA) V Anantha Nageswaran on Monday said that weak and fragmented data systems at the gram-panchayat level have left state finance commission (SFC) reports too weak to guide recommendations, with the 16th Finance Commission unable to rely on them while framing its recommendations.
Nageswaran also said that there is a need to introduce uniform accounting heads for fiscal accountability of states, ensuring homogeneous treatment of all central transfers to local bodies to enable comparability. “The audit of fund flow to Panchayati Raj Institutions (PRIs) by Comptroller and Auditor General of India (CAG) of Panchayati Raj Institutions will improve their functioning and enhance ease of living at the rural level,” Nageswaran said, while launching of a report on datasets for state finance commissions here.
The CEA also said that the local governance and rural service delivery depended less on macroeconomic variables and more on how effectively panchayats were empowered to function. “In fact, ease of living at the ground level is determined by how well-equipped and capable panchayats are, and not necessarily by macro factors, which do impact them with a lag and somewhat indirectly. Because without a systematic, independent assessment of what has actually been devolved versus what was promised, we are flying blind,” Nageswaran said.
Generally, finance commission transfers to rural local bodies form a key part of India’s fiscal decentralisation framework, helping fund basic services such as drinking water, roads, sanitation and Anganwadi’s in villages. “This data often does not exist in usable form. Financial records are incomplete. Different departments hold information in silos that do not talk to each other. Accounting standards vary across states, making comparisons difficult,” Nageswaran said.
Nageswaran also pointed out that some concerns are raised by successive finance commissions over the poor quality of SFC reports, particularly the latest panel.
“The 16th Finance Commission puts it very plainly: it has been unable to use State Finance Commission reports for framing its recommendations because those reports are too heterogeneous in approach and too thin in analytical rigour,” he said, adding that it is a very serious indictment and it reflects, more than anything else, a data failure.