The Hindu : Business : Quality Control Fund for States mooted

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Quality Control Fund for States mooted

MUMBAI: A fund to reward States has been mooted by Reserve Bank of India (RBI) to improve efficiency and control over the expenditure of State governments.

An RBI study, conducted to improve the quality of public expenditure to obtain better outputs, has named the fund as Quality Control Fund, which could be kept aside to reward States for their performance on expenditure adequacy, effectiveness and efficiency, an RBI release said.

RBI study

The study, entitled Introducing expenditure quality in governmental transfers: a triple-E framework, has urged to tie the funds that States receive from this incentive fund to spending on education and health.

Another study, an outline of post-2009 FRBM Fiscal Architecture of the Union Government in the medium-term, has emphasised the need for reconciling the discrepancies between the fiscal deficit and movement in debt.

The study has attributed the discrepancies to the exclusion of off-budget liabilities and MSS (market stabilisation scheme) scheme in fiscal deficit while being part of outstanding liabilities among other factors.

For the fiscal consolidation framework, interest payments (IP) to revenue receipts (RR) ratio is considered the target variable, and based on budgetary identity, the study derives the tolerable level of deficit and debt under alternative assumptions of growth and interest rate. Both studies have been undertaken under the aegis of the Development Research Group of the Reserve Bank along with experts in the related areas, the central bank said. — PTI

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