Fiscal consolidation without squeezing expenditure is desirable: Jaitley

Says NPA legacy left over by UPA and demonetisation along with GST to result in less cash economy

Finance Minister Arun Jaitley on Thursday said the Budget stayed on the path of fiscal prudence without squeezing expenditure on the productive sectors in contrast with the United Progressive Alliance (UPA) government, which had cut expenditure in 2012-13 and 2013-14. 

Replying to a debate on the general Budget in the Lok Sabha, he tried to turn the tables on the Congress for rising non-performing assets (NPAs) of public sector banks. He blamed the then finance ministry for influencing banks to give loans to liquor baron Vijay Mallya, without taking the name of the businessman. 

The finance minister defended the proposal on political funding, taking on those finding lacunae in the decision of reducing cap on cash donation to Rs 2,000, from the current Rs 20,000. He said the reduction was not an idea of the government but that of the Election Commission. 

Defending currency ban, Jaitley said except for two-wheeler sales, other parametersdid not reflect an adverse impact of demonetisation on the economy. 

The finance minister said what mattered was not just the fiscal deficit number but also the quality of deficit. 

The UPA government, he said, had cut Plan expenditure to Rs 4.13 lakh crore from the Budget Estimates (BE) of Rs 5.21 lakh crore in 2012-13. It had also reduced it to Rs 4.52 lakh crore from Rs 5.55 lakh crore in 2013-14. 

“If you had cut over Rs 1 lakh of (Plan) expenditure, your quality of fiscal deficit was poor,” Jaitley told the Congress benches.  

The UPA government had narrowed fiscal deficit to 4.8 per cent from the budgeted 5.1 per cent in 2012-13 and 4.4 per cent from 4.8 per cent in the BE for 2013-14.

Jaitley said the National Democratic Alliance (NDA)  government had spent more than the budgeted amount in the past two years because of increase in revenue by 17 per cent in each year. 

From 2017-18, giving a break-up of expenditure in Plan and non-Plan heads has been discontinued in the Budget. The classification now comprises revenue and capital expenditure. The Budget gave figures for the previous year in the new classification. In 2016-17, according to the Revised Estimates (RE), the government is projected to spend Rs 2.79 lakh crore, against Rs 2.47 lakh crore in BE. 

The finance minister said while most observes appreciated the reduction in fiscal deficit at 3.2 per cent in 2017-18, from 3.5 per cent in the current financial year, the Congress said it should be reined in at three per cent. If it was contained at that rate, where would have growth come from as private expenditure was already low, he asked. 

The fiscal consolidation road map had pegged fiscal deficit at three per cent for 2017-18, but the Budget widened it by 0.2 percentage points, taking a slight leeway from a committee on fiscal responsibility and budget management. 

Taking on those attacking the government on the job creation front, Jaitley said the Budget had allocated Rs 3.96 lakh crore to the infrastructure sector and Rs 2.41 lakh crore to the transport sector for 2017-18.

Defending the Narendra Modi government’s move of demonetisation, Jaitley said all parameters, including tax receipts, rabi sowing, car sales, did not point at any slowdown. Only two-wheeler sales were down in the months of November and December due to the impact on informal economy which is in the process of getting integrated with the formal economy. 

He said along with the goods and services tax, demonetisation would lead to greater digitisation which will reduce the need for cash economy.

Responding to Congress leader Veerappa Moily’s charges that bad debt of public sector banks had increased, Jaitley said it was because of rising interest on these NPAs, which were a legacy of the UPA government. 

He said Congress leaders had said for “infinite” number of times that the current regime gave Rs 1,200-crore advantage to a person, who had fled to London. 

“Not a rupee advantage by any bank since May 26, 2014, was given  to that person by any bank. Now the documents which have come out .... this was not happening not by banks but through the influence of the North Block. Bank officials are paying for that now.”