Union Finance Minister Arun Jaitley feels that the acceptable level of fiscal deficit is 3 per cent and it should be controlled through economic expansion and tax buoyancy, not slashing expenditure.
Jaitley said on Tuesday: "Fiscal deficit has to be maintained at an acceptable level. And, the current acceptable level, which is by the FRBM (Fiscal Responsibility and Budget Management) Act, is that you have to move towards 3 per cent. I would personally have been happier if the containment of fiscal deficit takes place by expansion of the economy, by greater tax buoyancy, by greater tax collection rather than by contracting expenditure. When you spend less, you also tend to contract the expenditure and the economy. Therefore, we will have to have a judicious mix of expenditure as well as revenue collections."
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Jaitley was replying during the Question Hour in Rajya Sabha.
"If fiscal deficit goes out of control, that would mean the nation is borrowing more to finance its current expenditure and will leave behind a legacy of debt. Fiscal deficit has to be maintained at acceptable levels," he said, refusing to give a target for 2014-15 saying the Budget will spell out those numbers.
"So, if we are borrowing more in order to finance the current expenditure, we are spending beyond our means. If we are spending beyond our means, we are going to leave behind a legacy of debt."
Fiscal deficit in 2013-14 was 4.5 per cent of the GDP down from 4.9 per cent in the previous year and 5.8 per cent in 2011-12, Jaitley said adding that it has been showing declining trend during the past three years. "The level of fiscal deficit during current year (2014-15) up to May is Rs 2,40,837 crore, which is 45.6 per cent of Budget Estimate of 2014-15."