The government may have chosen to spend more this year to boost growth, but finance minister Arun Jaitley on Sunday stressed on the need for fiscal consolidation and said that governments spending more than their means could lead to capital flight and loss in value of currency. Referring to the Greek crisis, he said that for good governance, the government has not only to augment its resources through better revenue collections but also to manage its expenditure well or even both. “The public exchequer, government money is people’s money after all and this money is something which is sacrosanct. Sacrosanct for the reason that governments have to learn the discipline of living within their means,” he said at the first Indian Cost Accounts Service Day. [related-post] The finance minister noted that in the inter-connected world, if governments do not live within their means, it can have a lot of adverse consequences. “It can lead to outflow of capital.it can have an adverse impact on your currency rates.It can knock off fiscal discipline,” he said. For 2015-16, the Centre has pegged its fiscal deficit at 3.9 per cent of the GDP and proposed to lower it to 3 per cent by 2017-18. Stressing that the only way to stick to fiscal discipline is to earn more or spend less, Jaitley said, “The ideal route is to do both. And that is what governments are now endeavouring to do.” Governments also need professional advice to ensure they do not overspend, he noted. “And obviously, people with varied experience who run the government, the permanent establishment of the government is civil service. How above the professional the civil service is, its ability at analysing cost could always be limited. And therefore, the creation of a catalyst service which analyses the cost and comes to a realistic assessment of cost is necessarily required,” he said. “We have adhered till now to the glide path, but now the challenge or rather the challenges are in the area of capital expenditures, like roads, railways and irrigation. These areas of public investment will require cost control and effective management of expenditure,” he said. He however noted that while the fiscal consolidation process has been successful in taming the fiscal deficit, public finance on revenue side requires attention particularly due to the target set for the revenue deficit under the new Fiscal Responsibility and Budget Management regime. “This necessitates structural changes in the Plan spending and definitive measures to contain Non-Plan spending within sustainable limits,” he stressed, adding that the government also needs to control its spending on subsidies. He also said that from this year the government wants to move to a real-time system of budgetary allocation and expenditure.
