The Foundation for Democratic Reforms organised the third edition of the Indian Democracy at Work Series on the 4th of November, 2023 at the India International Centre (IIC), Delhi. The National Roundtable was centred around the theme ‘A Viable Framework for Fiscal Prudence’ inviting the foremost thinkers and experts on public policy, public finance and public opinion to discuss short-term and long-term measures to institutionalise fiscal prudence in the country. The prominent panel of speakers present at the conference included Shri Yashwant Sinha (Former Union Minister of Finance and External Affairs), Shri Prithviraj Chavan (Former Chief Minister of Maharashtra), Shri Manish Tewari (Former Union Minister of Information), Shri Montek Singh Ahulwalia (Former Deputy Chairman, Planning Commission), Dr. Rakesh Mohan (Member of the Economic Advisory Council to the Prime Minister), Dr. M. Govinda Rao (Member, Fourteenth Finance Commission) and Shri T.S. Krishnamurthy (Former Chief Election Commissioner of India) among other leading experts and legislators. The discussion was held in three different sessions with each session centred around a different theme on streamlining public finance management.
The first session was a discussion on Constitutional mechanisms to safeguard Public Finances in a Federal Polity. The objective was to lay down a comprehensive understanding of the current state of public finances, looming challenges, and to promote discussion and deliberation regarding potential solutions. The issues discussed were the sustainability of borrowings on current expenditure, intergenerational equity, effective monitoring of public expenditure, and the possible approaches to ensuring independent, transparent and non-partisan exercise of authority under Article 293(3). Promoting intergenerational equity featured prominently, emphasising the issue of deferred liabilities impacting future generations. The biggest challenge in this context was accounting for liabilities in real time, for which a transition to an accrual-based accounting system was proposed. In order to institutionalise fiscal transparency and monitor oversight without endangering the autonomy of elected governments, the panellists proposed introducing independent bodies in-charge of fiscal management, such as a Fiscal Council akin to the UK’s Office for Budget Responsibility. On the other hand, some argued that multiple regulatory bodies may dilute accountability, recommending that fiscal oversight stay within the Union’s political and legislative framework.
The second session centred around developing a sustainable pension system for government employees, in particular, the pitfalls of the Old Pension System (OPS) and the dissatisfaction with the New Pension System (NPS). Participants emphasised the need for intergenerational equity in public expenditure through various measures such as developing a constitutional mechanism to reflect unfunded pension liabilities in the current budget, creating a sinking fund that would allow for systematic resource allocation, treating unfunded pension liabilities as deferred public debt and developing a hybrid model of pension system consisting of features from both OPS and NPS. There was consensus to replace wage-indexation from defined benefit plans with price indexation to preserve purchasing power while limiting fiscal pressures.
The third and final session of the conference focused on developing a viable roadmap for universal social security coverage. The objective was to discuss a lack of social security coverage for a sizable population in the country. Key themes discussed included expanding existing schemes, reforming policies, and creating financial strategies for extending sustainable coverage to the unorganised sector as well.
The Foundation for Democratic Reforms (FDR) has vehemently worked towards halting the reversal of policy in several states to switch to the unfunded, index-linked, defined benefit-based OPS, which will spell disaster to public finances in the long run. The Indian Democracy at Work National Roundtable convened by the Foundation for Democratic Reforms culminated with a call for structural reforms in order to develop a viable roadmap for fiscal prudence and offered practical solutions for a host of obstacles. From safeguarding public finances in a federal polity to addressing pension system reform and expanding social security to the vast unorganised sector, the discussions underscored the urgency for both immediate and long-term interventions. A unifying theme across all sessions was the imperative of intergenerational equity—ensuring today’s decisions do not compromise tomorrow’s fiscal health.