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CII launches Fiscal Performance Index to assess Central, state budget

Date: 06 June 2019 Tags: Basics of Economics

Industry body Confederation of Indian Industry (CII) has launched 'Fiscal Performance Index' to assess quality of budgets presented by the Centre and state governments. It is innovative tool that will examine quality of Budgets at the Central and State levels using multiple indicators.

Fiscal Performance Index

  • It has been constructed using UNDP's Human Development Index (HDI) methodology. It comprises six components for holistic assessment of the quality of government budgets.
  • Six components are
  1. Quality of revenue expenditure: measured by the share of revenue expenditure other than interest payments, subsidies, pensions and defence in GDP.
  2. Quality of capital expenditure: measured by share of capital expenditure (other than defence) in GDP.
  3. Quality of revenue: ratio of net tax revenue to GDP (own tax revenue in case of States).
  4. Degree of fiscal prudence I: fiscal deficit to GDP.
  5. Degree of fiscal prudence II: revenue deficit to GDP.
  6. Debt index: Change in debt and guarantees to GDP.
  • It will also consider expenditure on infrastructure, education, healthcare and other social sectors can be considered beneficial for economic growth.
  • It will also consider tax revenues are sustainable sources of revenue for the government as compared to one-time income sources.

Comment

The index take into consideration holistic performance of all entities viewed from all angles of expenditure quality, revenue receipts quality, and fiscal prudence. It moves away from existing mechanism of assess Central, state budget from narrow and sole view of Fiscal Responsibility and Budget Management (FRBM) Act which sets targets for the governments to reduce fiscal deficits.

About Confederation of Indian Industry (CII)

  • It is an association of Indian businesses which works to create environment conducive to growth of industry in India.
  • It is a non-government, industry-led and industry-managed, not-for-profit organization. It was founded in 1895 and is headquartered in New Delhi.
  • It has over 9,000 members, from private as well as public sectors, including SMEs and MNCs and indirect membership of over 300,000 enterprises from around 265 national and regional sectoral industry bodies.
  • It works with Government on policy issues. It also has been catalyst of change in India’s economic policy reforms.