New Delhi: Stressing the need for fiscal consolidation, Finance Minister Arun Jaitley today said that governments spending more than their means could lead to capital flight and loss in value of currency.
Speaking at the first Indian Cost Accounts Service Day celebration here, Jaitley said what happened in Greece recently was a direct consequence of the fact that governments there decided “not to live” within their means. “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. In the inter-connected world, if governments do not live within their means, it can have a lot of adverse consequences, Jaitley added. “It can lead to outflow of capital...it can have an adverse impact on your currency rates...It can knock off fiscal discipline,” Jaitley said.
The government has pegged the fiscal deficit at 3.9 per cent of the GDP for FY 2015-16 and proposed to lower it to 3 per cent by FY 2017-18. Jaitley further said the only way to stick to fiscal discipline and follow the road of fiscal consolidation is either “you earn more or spend less”. “And the ideal route is to do both. And that is what governments are now endeavouring to do,” he said.
He added that governments need professional advice so as to ensure that they do not overspend. “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,” the Finance Minister said.
Speaking on the occasion, Expenditure Secretary Ratan P Watal said the government has embarked on an important fiscal consolidation programme. “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 further said the government has managed to control expenditure through rationalisation and the ongoing fiscal consolidation process has been “successful” in taming the fiscal deficit.
Watal further said the government is committed to progressively pursue subsidy reforms in a manner that will ensure efficient targeting of subsidies to the poor and needy while saving scarce financial resources for investment in infrastructure and development programmes.
“Keeping in view the present and emerging scenario, the Indian Cost Account Service officers.can play a significant role in expenditure management ensuring highest level of efficiency, rendering advice on rationalising of subsidies and in enhancement of tax and non-tax revenues.” The Secretary also said that from this year the government wants to move to a real-time system of budgetary allocation and expenditure.
