How to curb irresponsibility

Context:

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.