NEW DELHI: Finance Minister P. Chidambaram on Monday urged the State Governments to spend the funds allocated to them from the first day of the new fiscal year rather than wait till the last few months and build up huge unutilised funds.

Replying to the discussion on the budget in the Rajya Sabha, the Minister pointed out that the States were sitting on a huge cash balance due to increased devolution of funds.

In the first year of the United Progressive Alliance Government, Rs. 74,000 crore was devolved to States; that was raised to Rs. 94,400 crore in 2005-06 and it went up to Rs. 1,13,448 crore in 2006-07. "If [the] States spend [these funds] they will meet targets which means more money in the hands of the people," he said.

While agreeing that the education and health sectors needed more allocation, he said the absorption capacity of the ministries concerned and the States was "limited." This was reflected in unutilised funds. Ministries not spending 66 per cent of allocation in the first nine months would be penalised, he said.

"Help agriculture"

Noting that economy was on a "virtuous growth path," he said agriculture should be given a helping hand and nothing should be done to hinder investment in the area. "If the economy continues to grow at eight per cent and revenue at the current level of 20 per cent, there will be enough space for resources in the social sector," he said.

Charging the previous National Democratic Alliance Government with "losing a lot of ground in the management of the economy," Mr. Chidambaram said the UPA Government had retrieved the lost ground. "Fiscal deficit that climbed to 6.2 per cent in 2001-02 has been brought down to 4.1 per cent — the same level as that of 1996-97. Next year's target is 3.8 per cent," he said.

Pointing out that the revenue deficit could be wiped out by expenditure control and revenue enhancement, he said the Government was exercising tight control. While farm income could not be taxed, the bulk of the revenue came from the industrial or manufacturing sector. The Government could do more for farmers on the credit front, but with the interest rates harder and inflation at four per cent, it was not possible now, Mr. Chidambaram said. Even for extending the concession proposed in the budget, the banks would have to be "persuaded," for which he had convened a meeting on March 23.

The House returned by voice vote the Appropriation Bills, 2006.

Earlier, Communist Party of India (Marxist) leader Sitaram Yechury said the potential for implementing programmes for the welfare of people was not fully utilised in the budget proposals. "What is worrisome is that growth is at the expense of equity. The proposals avoid taxing the rich while squeezing the vast mass of Indian people."

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