How to curb irresponsibility
There is a need to envision better ways for Parliament to write a fiscal responsibility law for lawmakers.
Challenge of Fiscal Responsibility Law
- Political Overspending: Ruling parties tend to overspend to secure future electoral victories, leading to fiscal issues down the line.
- Deferred Taxation: The practice of excessive spending today ultimately translates into increased taxes for citizens in the future.
- Global Models: Countries like Germany and the U.S. implement fiscal mechanisms (e.g., debt brake, debt ceiling) to restrict borrowing and effectively manage debt levels.
Flaws in India's Fiscal Responsibility Law
- FRBM Act's Introduction: Instituted in 2003, the Fiscal Responsibility and Budget Management Act aimed to rein in excessive deficits.
- Amendments Weakening Targets: Frequent legislative changes, facilitated through Finance Acts, erode the original fiscal targets set by the FRBM Act.
- Constitutional Barriers: The classification of the Finance Bill as a money bill grants the executive government the authority to modify FRL provisions, circumventing parliamentary scrutiny and debate.
Parliamentary Constraints and Solutions
- Anti-Defection Law's Limitations: MPs cannot vote against party wishes. Voting down the Finance Bill, vital for fiscal control, is a nuclear option.
- The Flawed Concept of Money Bill: Considered the ultimate escape clause, regardless of fiscal rule's design, hindering fiscal responsibility.
- Need for Fiscal Institution Building: Instead of an FRL as Parliamentary law, focus should be on robust fiscal institutions to ensure responsibility.