Finance Minister Arun Jaitley on Monday asked States to continue maintaining fiscal discipline, pointing out that the Centre meeting the fiscal deficit target for 2015-16 brought immediate gains in terms of a lower interest rate and improved credibility to the Indian economy.

“…all of us will have to spend within means. We have seen that ever since we have shown this tendency of spending more yet sticking to fiscal discipline, this has brought immediate results in terms of interest rates and India’s credibility,” Jaitley said at the second conference of State Finance Secretaries.

He, however, noted that most States have managed to maintain fiscal discipline.

The Centre has decided to lower the fiscal deficit to 3.5 per cent of the GDP in 2016-17 after meeting the target of 3.9 per cent in the previous fiscal. On cue, the Reserve Bank of India cut the repo rate by 25 basis points in the monetary policy for the fiscal last week.

Quality of expenditure

Jaitley also stressed that States must ensure quality of expenditure so that it is spent in development activities in the social sector, infrastructure creation and rural areas that have been conventionally ignored in the past.

“The tendency to spend it on non-development activities may in the short term appear to be attractive but in longer run it doesn’t reap results,” he said, adding that this will also help in boosting growth.

Noting that the quantum of funds with States has increased after the award of the Fourteenth Finance Commission, he further said, “Now an important onus on us is to actually spend and then make sure how and where we spend it.”

DBT scheme

Jaitley also asked for cooperation from States in implementing the Direct Benefit Transfer scheme. This was also re-iterated by Minister of State of Finance Jayant Sinha who said that States have to ensure that the benefits of DBT reach citizens across the country.

“We need to work in partnership with the States to make the schemes and programmes a huge success,” he said.

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