Replying to supplementaries during Question Hour in Rajya Sabha, he said fiscal prudence is required to put the country's economy back on track.
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, he said.
"Fiscal deficit has to be maintained at acceptable levels," he said, but refused to give target for 2014-15 saying his Budget on Thursday will spell out those numbers.
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, he said, adding the fiscal deficit was showing declining trend during past three years. To reduce fiscal deficit below desirable level and to improve macro-economic environment, the government has taken various measures for rationalisation of expenditure and optimisation of available resources.
"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," he said. Government, he said, has adopted roadmap for fiscal consolidation following amendment to the FRBM Act.
FRBM Act provides for lowering fiscal deficit to 3 per cent of GDP. He said he personally favoured bringing down fiscal deficit by "expansion of economy and tax buoyancy rather than by contracting expenditure". "Despite several challenges, government has been steadfast in policy of fiscal rectitude.
In the medium-term framework, the reduction in fiscal deficit has been designed with a judicious mix of reduction in total expenditure as percentage of GDP and improvement in gross tax revenue as percentage of GDP," Jaitley said.
When P Rajeev (CPM) asked about Rs 5.01 lakh crore in uncollected taxes and another Rs 5.29 lakh crore in revenue foregone by way of exemptions, the Finance Minister said tax collection drive will be intensified and there will be no laxity shown to those who owe taxes.
However, exemptions from payment of income tax to certain categories to give flip to industry were needed, he said.