Stressing that public expenditure is the main driver of growth, Finance Minister Arun Jaitley today asked states to focus on infrastructure and social sector while staying on the fiscal discipline path.
Jaitley, while addressing the conference of state finance secretaries, also asked the states to ensure optimum utilisation of resources without any leakage.
"There is more fiscal space available to the states now-a -days after implementation of the 14th Finance Commission recommendations... 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," he said.
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 to 42 per cent.
"At present, the public expenditure is the main driver of growth in view of challenging global situation," he said, asking the state governments to spend effectively in such a manner that there is "optimum use of resources without leakages".
Addressing the conference, Finance Secretary Ratan Watal said states are requested to align their focus to the thrust provided in the Union Budget to promote investment and growth in the rural sector. "It is imperative to step up capital expenditure at the state level also," he added.
Jaitley said there have been some states which have been given leeway to borrow more. "... But all of us will have to learn to live and spend within means and stick to fiscal discipline," he said.
"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."
The Union Cabinet last week allowed states with sound finances to borrow an additional 0.5 per cent of their GDP over and above the 3 per cent prescribed by the Commission to help them meet their developmental needs.
