Montek Singh’s tips to Kamal Nath
Bhopal: With the Centre’s growing hostility causing a financial crunch Madhya Pradesh government is looking for resources to fulfil promises made in the ruling Congress party’s manifesto. The Centre has slashed the state’s share in the recent budget by Rs 14,000 crore. It has also blocked the money accrued to the state from the GST collections.
With the second budget coming up soon the government has been under pressure to device spectacular ways to win public appreciation. Kamal Nath’s old friend and colleague Montek Sing Ahluwalia came to his aid with some tips to move forward.
At a workshop on ‘Alternative Finance for Projects’ on Tuesday former Deputy Chairman of the erstwhile Planning Commission, Montek Singh Ahluwalia suggested redrafting the Fiscal Responsibility and Budget Management Act (FRBM) to deal with increasing financial needs and fiscal limitations of states.
He said a law could be enacted for public-private partnerships to overcome the budget constraints for socially important economic infrastructure projects, he added.
Addressing the workshop Kamal Nath said the global economic scenario is changing rapidly. The financial institutions and the governments also need to change their thought-process.
Nath said that a vast country like India has largest society of aspirational youth and increased budget resources are required to fulfil their ambitions. Banks, state governments and private sector institutions need to adopt the change.
Nath called for deviating from the process of conventional budget-making process and working on alternative processes and innovative ideas. He said there was need to focus on the economic activities that generate jobs.
States like Madhya Pradesh that have abundant natural resources, but they lag in expanding economic activities. He said that efforts are on to make Madhya Pradesh’s agriculture fully modernized to see that farm related economic activities can also be expanded, he said.
Ahluwalia said governments have limited financial resources for ambitious projects. The governments have many tasks, responsibilities, priorities and social obligations apart from economic infrastructure projects. There are many challenges in completing them simultaneously. As a result, the speed of projects slows down.
Ahluwalia said conventional approach of depending on budgetary resources should change. States look towards the private sector for assistance. The private sector dreads taking risks while the governments are bound by the welfare principles beyond the loss and profit. Both have their limitations. Therefore, there is a need for a law to work in cooperation between the two.
Instead of managing finances for large economic infrastructural projects, the system of providing guarantee by the state should also be considered, said Kamal Nath. The governments should assume the role of a friend in managing the financial risks for the projects. For example, in order to deal with the ill effects of climate change, infrastructure projects of economic importance should be given a guarantee.
The workshop was attended by top officers of banks, budget experts from the corporate sector, scholars with special abilities in budget formulation and senior officials of departments.