Quality of fiscal deficit matters: Jaitley

It's better when country has maximum public expenditure while maintaining fiscal consolidation: FM

Union Finance Minister Arun Jaitley on Thursday said not only was it important to meet the fiscal deficit target but also to maintain its quality so that the economy's growth is not affected.

"What matters is not only fiscal deficit, but also the quality of fiscal deficit. You can contain it by earning more and cutting down on expenditure. But cutting expenditure is a fallout for the economy because the growth goes down," Jaitley said in the Lok Sabha.

"The quality of fiscal deficit is better when we have maximum possible public expenditure, while maintaining fiscal consolidation. And also have resources come in from wherever possible like foreign direct investment (FDI)," he added.

"In Budget 2017-18, I have maintained the path of fiscal consolidation without compromising on expenditure. No tax refunds have been held, but I have not cut any expenditure at the same time," Jaitley had said earlier.

He pointed out that in this regard, both for the current and last fiscals, the revised Estimates of Expenditure have come in higher than the Budget Estimates.

In a move to support higher government spendings in the coming fiscal, Jaitley has pegged the fiscal deficit target at 3.2 per cent of the country's Gross Domestic Product in his Budget 2017-18 presented in Parliament on February 1.

The figure is higher than the earlier targeted figure of 3 per cent of the GDP for 2017-18. The fiscal deficit target for the current fiscal is 3.5 per cent, and 3 per cent for 2018-19.

On the festering issue of non-performing assets (NPAs) or bad loans of public-sector banks, Jaitley on Thursday said these are substantially a result of overmanagement of banks.

"NPAs are a result of loans given during 2007-09. NPAs are partially because of the slowdown but substantially because of overmanagement of the banking system," he said in the Lok Sabha.

The banks' capacity to lend and bring interest rates down has increased as an outcome of demonetisation, he added.