The new standing committee on finance: What to expect

In the complex machinery of Indian democracy, Standing Committees of Parliament serve as the institutions, working quietly behind the scenes to ensure that legislations are scrutinised and policies are fine-tuned before implementation. Among these, the standing finance committee is particularly vital, overseeing critical aspects of fiscal policy, government spending, and economic reforms. With India's diverse and dynamic economy, the significance of these committees cannot be overstated.

Standing committees in India were institutionalised in 1993, primarily aiming to improve parliamentary efficiency. Over the years, they have become instrumental in bridging the gap between policy design and implementation. The standing committee on finance, in particular, holds the government accountable for its fiscal decisions and provides recommendations that ensure sound economic governance. The Preamble of our Constitution guarantees every citizen ‘economic democracy'.

One of the most consequential economic reforms in modern Indian history, was the introduction of the Goods and Services Tax (GST) in 2017. However, the foundation for this reform was laid much earlier, well before the landmark bill was passed in Parliament. As we reflect on its origins, we recognise the pivotal role played by the standing committee on finance, chaired by Yashwant Sinha in the early 2000s. The committee rigorously debated and examined the idea of GST, and its recommendations on the structure, implementation, and likely economic impact were crucial in shaping the final legislation. By facilitating bipartisan discussions, the committee helped ensure a comprehensive understanding of both the potential hurdles and advantages of this historic reform.

In reflecting on the 2G spectrum case, we are reminded of the critical role played by the standing committee on finance, particularly in the scandal's aftermath. Working closely with the Public Accounts Committee (PAC), the two bodies acted in unison to ensure the government was held accountable. Under the leadership of Murli Manohar Joshi, both committees meticulously examined the details of the scandal and its financial repercussions. Their thorough investigation and resulting report not only shaped the conversation around the transparent allocation of natural resources but also underscored the need for stricter guidelines to prevent similar scandals in the future.

During the COVID-19 pandemic, we witnessed India facing one of its most severe economic crises. While the government introduced several relief packages, it was the standing finance committee that took on the critical role of evaluating how effective these measures were. In 2020, under the leadership of Jayant Sinha, the committee recommended additional fiscal stimulus to support struggling businesses and individuals. Their recommendations played a key role in ensuring the government remained proactive in reassessing economic needs and adjusting its fiscal policies. This experience underscored for me the importance of strong parliamentary oversight in preventing further economic decline.

On the competition law side, the recently passed Competition (Amendment) Act, 2023 was earlier referred to the Standing Committee on Finance, headed by Shri Jayant Sinha. The Committee gave its recommendations in its 52nd report. The Committee also conducted a series of meetings with Indian companies on the subject 'Anti-Competitive Practices by Big-tech companies' and delivered its 53rd report. The parliamentary panel had summoned top executives of Bigtech and leading digital companies like Amazon, Google, Apple, Microsoft, Netflix, Twitter, et al. to discuss anti-competitive practices in the digital markets. The proceedings also helped the committee in preparing its report on the Amendment Bill. The panel has held detailed deliberations with the Competition Commission of India (CCI) and its parent ministry, Ministry of Corporate Affairs. The panel also summoned Indian technology firms, food delivery platforms like Zomato and Swiggy, e-commerce platforms like Flipkart, and aggregators like Ola and OYO. This gives a reflection on the importance of this Committee.

Speaking of the latest developments, in its 68th report, it focused on Strengthening Credit Flows to the MSME Sector. In its 67th report, it gave its observations on the implementation of Insolvency and Bankruptcy Code-Pitfalls and solutions and 66th report on a performance review of the insurance sector. These reports collectively underscore the need for improved financial governance, accountability, and strategic policy alignment to foster sustainable economic growth and social development. They also showcase the viewpoint of the Parliament on various issues and help the respective ecosystem (for eg, insurance, competition, IBC, etc.) in a particular way.

Shri Bharturi Mahtab heading the standing committee on finance
Bhartruhari Mahtab has extensive experience in parliamentary work, having been a member of the Lok Sabha since 1998. He has chaired several standing committees, including the Committee on Public Accounts (PAC), which oversees government spending and auditing. His familiarity with parliamentary procedures, combined with his deep insights into legislative work, would be an asset in guiding the Finance Committee through crucial discussions on fiscal policy and economic reforms. His methodical and well-researched approach could enhance the quality of scrutiny that the committee provides.

Coming from Odisha, Bhartruhari Mahtab has a keen understanding of the regional disparities in economic development across India. His leadership could lead to a more balanced focus on policies that promote equitable growth across states. Historically, certain regions have lagged behind in terms of infrastructure development, industrialization, and human capital investment. Mahtab could steer the committee to push for policies that not only focus on national-level economic reforms but also ensure that they have a positive impact on the northeast, eastern states, and other marginalized regions.

Given that the committee will be in a strong position to recommend policies and monitor their implementation, Mahtab could advocate for more resources and opportunities for underdeveloped regions, ensuring more inclusive growth.

What should Mahtab's standing committee on finance focus first
1. Data Protection and Privacy Laws: The committee has been involved in reviewing the Data Protection Bill. However, concerns around user privacy, the role of tech companies in data collection, and how to balance privacy with national security are still unresolved. The bill has gone through multiple drafts but is yet to be passed in its final form.
2. Cryptocurrency Regulation: India's stance on cryptocurrency remains unclear. While the committee has discussed the pros and cons of cryptocurrencies like Bitcoin, concerns around its regulation, potential misuse for illegal activities, and financial risks are still unresolved. No formal legislation on cryptocurrency has been passed as of yet.
3. Start-up Funding and Innovation: While India has seen a surge in start-up activity, the committee has identified gaps in funding, especially for early-stage start-ups. There's still no resolution on creating more structured avenues for access to capital for smaller, emerging start-ups, despite discussions on this front.
4. Regulatory Framework for Fintech: The fintech sector has been rapidly expanding, but there is no comprehensive regulatory framework that covers the whole spectrum of activities within fintech, such as peer-to-peer lending, digital wallets, or digital payments. The committee has not yet resolved how to regulate these areas without stifling innovation.
5. Taxation of Digital and Gig Economy: The digital and gig economy, including platforms like Uber, Zomato, and Swiggy, presents taxation challenges. The committee has debated how to tax these platforms fairly while ensuring that workers and freelancers are not disproportionately affected. However, clear guidelines and resolutions are still pending.
6. Banking Reforms and NPAs: Non-performing assets (NPAs) continue to be a major concern for the Indian banking sector. The committee has been discussing banking reforms, but there is still work needed to resolve the NPA crisis and further strengthen the banking system to prevent future risks.
7. Environmental, Social, and Governance (ESG) Reporting: There is growing global momentum around ESG reporting standards, but India still lacks a comprehensive framework for businesses to follow. The committee has discussed ESG criteria but has not yet formalized its recommendations or laws on mandatory ESG reporting for companies.
8. Public Sector Divestment and Privatization: While the government has expressed its intent to privatize certain public sector undertakings (PSUs), the process has been slow, and there are concerns about transparency, employee job security, and the impact on the economy. The committee has not reached a clear consensus on how best to proceed with these divestments.
9. Digital Competition Law: While the Committee has already recommended a separate Digital Competition Law apart from the Competition Act, 2002. But there would be challenges in the journey ahead and we anticipate that the Committee would have to intervene to give its observations again and also summon the officials of Big Tech to gather more information and insights.

With this, we hope for a productive and futuristic Standing Committee on Finance under the able leadership of Shri Bhartruhari Mahtab to discuss economic and fiscal issues relevant to the country's development.

'Ritwik Mehta is a political strategist and Founder, Niti Tantra

'' Aditya Trivedi is Advocate, Delhi High Court and CCI