FM throws broadside at Montek on FRBM targets

New Delhi, Aug 31: Finance Minister P Chidambaram today again threw a broadside at Planning Commission Deputy Chairman Montek Singh Ahluwalia's stand on the FRBM Act decrying the ''temptation to resort to higher levels of government spending'' stating that a liberal stance in this direction would mean shifting the fiscal cost to the future generation.

''When the ship of the economy appears to be cruising at a comfortable speed, or as elections approach, the attractiveness of fiscal expenditure becomes irresistible. There is a temptation to resort to higher levels of government spending and lower levels of taxation which are believed to be magnets for voters. Such a liberal fiscal stance actually shifts the fiscal cost from this generation to future generations,'' Mr Chidambaram said at the JRD Tata Memorial Lecture, organised by Assocham here.

While the more spending and lower taxes may have immediate tangible benefits, the hidden costs are not visible to the current voter, he said.

Earlier this week, Mr Chidambaram had shot off a letter to Mr Ahluwalia disagreeing with him completely on relaxing the milestones set in the Fiscal Responsibility and Budget Management (FRBM) Act.

The Planning Commission had argued, in the 11th Plan Approach paper that the targets of Revenue Deficit and of Fiscal Deficit by 2009 should not come in the way of government spending.

While the Finance Minister was supported by the Reserve Bank of India, Mr Ahluwalia enjoyed the support of HRD Minister Arjun Singh who said money should not act as a constraint for the social welfare programmes like health and education.

Sharing concerns on the coalition governments, the Finance Minister said ''there is indeed a problem of arriving at a consensus within the coalition... The search for unanimity can lead to dealys in decision making and hence wasted economic opportunities.'' The subject matter of the JRD Tata Memorial Lecture was-- ''Economic Policy Making in a Coalition Era''.

The other concern of a coalition era, Mr Chidambaram is the presumed political instability associated with it and the consequent tendency of the government to become somewhat liberal or populist in its fiscal stance.

UNI