New Delhi - Stressing that public expenditure is the main driver of growth, Finance Minister Arun Jaitley on Monday asked states to focus on infrastructure and social
sector while staying on the fiscal discipline path.
Jaitley, while addressing the conference of state finance secretaries, also asked the states to ensure optimum utilisation of resources without any leakage.
"There is more fiscal space available to the states now-a-days after implementation of the 14th Finance Commission recommendations... The tendency to spend it on non-developmental activities may in the short term appear to be attractive, but in longer run, it doesn't reap results," he said.States' share in Union taxes has substantially gone up after implementation of the 14th Finance Commission report that prescribed a record 10 per cent increase in their share to 42 percent.
"At present, the public expenditure is the main driver of growth in view of challenging global situation," he said, asking the state governments to spend effectively in such a manner that there is "optimum use of resources without leakages".
Addressing the conference, Finance Secretary Ratan Watal said states are requested to align their focus to the thrust provided in the Union Budget to promote investment and growth in the rural sector. "It is imperative to step up capital expenditure at the state level also," he added.
Jaitley said there have been some states which have been given leeway to borrow more. "... But all of us will have to learn to live and spend within means and stick to fiscal discipline," he said.
"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."
The Union Cabinet last week allowed states with sound finances to borrow an additional 0.5 perent of their GDP over and above the 3 percent prescribed by the Commission to help them meet their developmental needs.
Minister of State for Finance Jayant Sinha said the states should use the direct benefit transfer scheme and Jan Dhan-Aadhar-Mobile trinity to ensure benefits of various government schemes reach the last man without delay or any pilferage.
Watal said total transfers to states, including grants in aid from the Centre, are estimated to be Rs 9.47 lakh crore in 2016-17 compared with Rs 8.36 lakh crore during 2015-16, an increase of 12 per cent of revised estimate (RE) of 2015-16.
The Centre has also approved an additional fiscal deficit to eligible states during the remaining period of the award from 2016-17 to borrow more under the two flexibility options.
Jaitley said that by and large states have maintained fiscal discipline and "if there are some difficulties or creases to be ironed out at your end with the Centre, please feel free to express. After all in the spirit of co-operation, we would like to see that all of them are resolved".
Stating that even though growth has been challenging worldwide, he said India has maintained a reasonable level of growth.
This has resulted in tax buoyancy and the resultant expenditure available at states' disposal has also increased.
"It is quite obvious that what states were getting in 13th Finance Commission and what they are getting now. It may have come down in one or two heads, but substantially... overall volumes have increased. Now, an important onus on us is to actually spend and then make sure how and where we spend it," Jaitley said.
He clarified that there is hardly any discretion with the Centre and there are no loose or untied funds that the Centre has.
"Therefore, whatever the Finance Commission has decided in terms of percentage, the states are entitled to it. It's no favour, it's a right to the states in federal politics and it's their right up to the nearest penny," he added.