The 26th Conference of the State Finance Secretaries was held in the Reserve Bank of India at Mumbai on 22nd May 2013. Finance Secretaries of 26 States participated. Dr. D.Subbarao, Governor, Reserve Bank of India inaugurated the Conference. Dr. Y.V. Reddy, Chairman, 14th Finance Commission also participated. Dr. K.C Chakrabarty, Shri Anand Sinha, Shri H.R Khan and Dr. Urjit R Patel, Deputy Governors and other senior officials of the Ministry of Finance, Government of India and the Reserve Bank attended the Conference.
The Governor highlighted that notwithstanding lower budgeted Gross Fiscal Deficit, managing debt issuance will be challenge due to increased size of borrowing, inflation risk, banks holding excess SLR and expected pickup in demand for private credit in later part of the year. Governor urged that States have to explore ways for better cash management, adequate information dissemination on State finances etc.
The Governor felt that the global arguments on debt sustainability and fiscal austerity need to be examined in the Indian context. The RBI will be doing a study on Indian sub-national debt sustainability to understand the dynamics of the problem. He also felt that the quality of fiscal consolidation is important and States should focus more on expenditure compression.
States have a critical role to play in inflation management as they are important stakeholders in eliminating supply constraints in the economy. They could address the supply constraints by increasing productivity in agriculture, improving infrastructure especially rural infrastructure, streamlining public distribution system and addressing governance concerns to create enabling environment for investment.
He also stressed on coordination between the State Governments and all other stake holders for increased surveillance at ground level in matters relating to financial inclusion as also for matters relating to chit funds & ponzi schemes and multilevel marketing schemes.
Other issues discussed included the projected market borrowings of the State Governments for 2013-14, effective cash flow projection by States, strengthening of Consolidated Sinking Fund/Guarantee Redemption Fund, migration of State Government business receipt/payment to electronic mode, recent instances of unauthorised deposit acceptance by unscrupulous entities and role of State Governments in customer education and awareness.
It may be mentioned that the Reserve Bank has been organising the Conference of the State Finance Secretaries along with senior officials of the Government of India and RBI. Over the years, this forum has facilitated key decisions on model fiscal responsibility legislation, revisions in limits on Ways and Means advances and Overdraft Regulation Scheme, adoption of auction method for market borrowing, setting up of Consolidated Sinking Fund and Guarantee Redemption Fund to name just a few.