Finance Minister Arun Jaitley speaks out on fiscal consolidation

NEW DELHI: Stressing the need for fiscal consolidation, finance minister Arun Jaitley on Sunday said governments spending more than their means could lead to capital flight and loss in value of currency.

At the first Indian Cost Accounts Service Day celebrations, 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% of the GDP for FY 2015-16 and proposed to lower it to 3% 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. “Obviously, people with varied experience who run the government, 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.