With the share of states in central taxes seeing a quantum jump, Finance Minister Arun Jaitley on Monday advised them to stick to fiscal discipline, spend on infrastructure and development activities and to use Aadhaar for transferring benefits to people.
Speaking at the second conference of state finance secretaries, 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."
States' share in Union taxes has substantially gone up after implementation of the 14th Finance Commission report that prescribed a record 10 per cent increase in their share in the Union taxes to 42 per cent.
"It is quite obvious that what states were getting in 13th Finance Commission and what they are getting now.
“It may have come down in one or two heads but substantially the other over all volumes have increased.
“Now an important onus on us is to actually spend and then make sure how and where we spend it," he said.
Jaitley said national focus is on larger expenditure on social sector, infrastructure creation and rural areas, which have conventionally been found lacking in the past.
"And, therefore, we must focus on specific expenditure in those areas," he said.
Talking of the manner in which resource must reach people, he said greater reliance on Aadhaar-based direct benefit transfer is going to be a clear agenda in future.
"We also have to ensure that some states depending on parameters have been given some additional fiscal space but all of us will have to learn to live and spend within means and stick to fiscal discipline.
"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 said.
Jaitley said that by and large states have maintained fiscal discipline and "if there are some difficulties or creases to be ironed out at your end with the Centre, please feel free to express.
“After all in the spirit of co-operation, we would like to see that all of them are resolved".
Stating that even though growth has been challenging worldwide, he said India has maintained reasonable level of growth.
This has resulted in tax buoyancy and the resultant expenditure available at states' disposal has also increased.
"I may point out that between officials of finance ministry and you (finance secretaries of states), there is scope for many grey areas as to which states are entitled to how much, but it is now no longer loosely defined," he said.
He said there was hardly any discretion that Centre has and there are no loose or untied funds that the Centre has.
"Therefore, whatever the Finance Commission has decided in terms of percentage, the states are entitled to it.
“It's no favour, it's a right to the states in federal politics and it's their right up to the nearest penny," he added.
