Finance Minister Arun Jaitley on Monday said with the 14th Finance Commission having substantially raised the states’ share in central taxes, states should raise expenditure on social sector and rural infrastructure, in line with the union budget’s focus.
“It is quite obvious that what the states are getting now is more than what they were getting in the 13th Finance Commission. It may have come down in one or two heads but substantially the overall volumes have increased,” Jaitley said while addressing the conference of state finance secretaries here.
“The onus is now actually on the states to spend and how and where to spend.”
“There is now an important national focus on increasing expenditure on social sector, infrastructure creation in rural areas. And, therefore, states must focus on those areas,” he said.
“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 added.
The 14th Finance Commission has substantially raised the states’ share in central taxes to 42 percent, an increase by 10 percent.
Jaitley also said since allocation to each state is based on Finance Commission rules, there is no bias or interference from the Centre.
“It is not loosely defined, it is very specific that which state gets how much allocation. The amount allocated to all states is the same and there is hardly any discretion that the Centre has. So whatever the Finance Commission has decided in terms of percentages, it is the right of the states in federal politics,” he said.
The finance minister also emphasised the need for states to stick to fiscal discipline so as to maintain global credibility.
“The kind of effective expenditure we make at the Centre and the states will determine India’s overall growth. There is a tendency to spend on short-term goals. We have to stick to fiscal discipline which will maintain our global credibility,” Jaitley 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,” he added.
Minister of State for Finance Jayant Sinha in his address underlined the need to work in partnership with the states for the successful implementation of central schemes and programmes.
“We need cooperation of the states to make the Budget and DBT (direct benefit transfer) benefits reach the citizens of our nation,” Sinha said.