1. Centre to evenly spread out spending in FY17

Centre to evenly spread out spending in FY17

Analysts have given the credit for India’s likely achievement of 7.6% growth in FY16 from 7.2% in FY15 to enhanced spending

By: | New Delhi | Published: April 20, 2016 6:17 AM

With public spending to play a big role for the second consecutive year to boost economic activity, the government will evenly spread out the Rs 19.78-lakh-crore budget for the current fiscal to perk up the aggregate demand.

The Centre had spent 51.2% of its Rs 17.77-lakh-crore budget in the first half of FY16, with front-loading of capital expenditure as private investment was weak while slackness in consumption continued.

Analysts have given the credit to enhanced spending for India’s likely achievement of 7.6% growth in FY16 from 7.2% in FY15.

“A similar spending pattern will likely be followed in FY17 also as the government is giving emphasis to evenly spreading expenditure throughout the year,” a finance ministry official told FE.

The total expenditure is budgeted to rise about 11% to `19.78 lakh crore in FY17, with Plan spending to increase 15.3% on-year while non-Plan spending by 9%. Notwithstanding constraints owing to higher wage and pension bill, the government also tried to improve quality of spending in FY17.

Its revenue expenditure (excluding grants to states for creation of capital assets) would marginally fall to 10.38% of GDP in the current fiscal from 10.43% in FY16 while capital expenditure (Plan, non-Plan and grants to states) would be 2.74% of GDP in FY17 as against 2.72% in the previous fiscal.

Although this would mean lesser scope for compressing expenditure in the final months of the year to meet the 3.5% fiscal deficit target in FY17, the idea now is to pan out spending in an even manner.

The officials are confident that revenues would be in sync with the budget targets. The budget projects gross tax receipts to rise 11.7% the current fiscal as compared to 17% in the last fiscal, which analysts said was conservative.

Gr4

Despite economy growing at a slower pace than anticipated, the Centre exceeded its gross tax revenue target of Rs 14.59 lakh crore in FY16 due to buoyancy in indirect taxes attributable mainly to increase in excise rates on petroleum products.

Officials are not worried, though, of a mere 3% increase in Plan capital spending in FY17. They said the full impact on the economy of the last year’s 35% growth in Plan capital spending would be felt in FY17. Also, the government was trying to pull off-balance sheet funds for infrastructure through the National Investment and Infrastructure Fund while private sector investment is expected to pick up.

Even though Plan capital spending would bear the brunt of higher salary and pension bill on account of Pay Commission award, the overall capital spending won’t slow much with growth rate moderating to marginally 11.9% in FY17 from 12.9% in FY16. Capital spending (including the grants to states provided under the revenue account for creation of capital assets) for FY17 is pegged to be Rs 4.14 lakh crore, up from Rs 3.7 lakh crore last year.

Unlike previous years when it resorted to huge cuts in Plan spending, the Centre managed to spend more than budgeted for Plan expenditure in FY16 while containing non-Plan spending within the budget target to achieve the 3.9% fiscal deficit target.

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