Proposed Dollar-rupee Swap Has Been Received Well: RBI Chief

Reserve Bank of India Governor Shaktikanta Das, on Tuesday, said that the proposed $5-billion dollar-rupee swap ‘has been received well’.

“March 26 is the auction, let’s see. I cannot say if we will repeat it,” he told reporters.

Book launch

Meanwhile, speaking at the launch of the book, Indian Fiscal Federalism, co-authored by a former Governor of RBI, YV Reddy, and GR Reddy, Das raised five key issues related to fiscal federalism in India, and proposed that the Finance Commission could possibly be given permanent status, and the scope of the Goods and Services Tax Council may be expanded beyond the indirect levy.

“Geopolitical risks have necessitated higher expenditure on defence and internal security. Natural calamities and disasters have called for higher expenditure on relief and rehabilitation,” he said, adding that in parallel, aspirations of the people and the country have required that the government spends more on developmental programmes.

Noting that while over the past several decades different Finance Commissions have adopted different approaches for devolution of tax revenue, grants, and fiscal consolidation, Das said there has to be a framework for fresh thinking for each panel and there should also be some continuity in views, especially after GST. “There is increasing need to give permanent status to the Finance Commission. In the intervening period, it can be a leaner organisation,” he said, adding that it can also address issues arising from the implementation of the recommendations of the Finance Commission.

Das, however, clarified that his views do not represent deliberations of the 15th Finance Commission, of which he was a member before heading the RBI.

At present, the Finance Commission is set up every five years to decide on the devolution of taxes between the Centre and States.

He also underlined the need to set up State Finance Commissions every five years.

Noting that initiatives such as GST have helped in fostering cooperative federalism, Das said the challenges for the GST Council are to meet the full potential of GST and to enhance tax-GDP ratio.

“Can the GST Council expand its scope to other areas of reforms to generate national consensus?” he asked.

Expenditure planning

The RBI Governor also noted that cooperative federalism should not lead to inertia, and there should also be a spirit of competition between States.

He also underlined the importance of the fiscal consolidation roadmap at the level of both the Centre and States. He called for robust expenditure planning based on commonly agreed goals.