Lok Sabha election concerns: Modi government asks top ministers to speed up spending

By: and |
New Delhi | Published: December 17, 2018 5:31:12 AM

With the interim Budget barely one-and-a-half months away, an election-bound government has asked key departments overseeing labour-intensive and infrastructure sectors not to curb the pace of spending this fiscal.

economy, modi governmentIn April-October this year, the Centre?s total expenditure was Rs 14,56,593 crore, 60% of BEFY19(nearly at the level of last year) while fiscal deficit was Rs 6,48,583 crore, that is, 104% of BEFY19.

With the interim Budget barely one-and-a-half months away, an election-bound government has asked key departments overseeing labour-intensive and infrastructure sectors not to curb the pace of spending this fiscal, and to ensure that funds meant for productive expenditure are used up on time, an official told FE.

The latest reverses for the BJP in assembly polls, purportedly due to farm distress, are expected to make the review of spending in these sectors by the government even stricter.

“Unlike previous years, there won’t be a cut in budget allocations for railways capex this year,” another official said. In the first eight months of FY19, railways has spent 70% of Rs 53,000 crore budgetary support planned for full year. There was a 27% cut in railways capex last year.

“The finance ministry has been very keen in its review of FY19 spending in sectors, including agriculture, textiles and garments and infrastructure. So expenditure under key schemes in these sectors is being monitored more closely than earlier even by the departments concerned,” said the first source. The idea is not to advocate a fiscal profligacy but to spend wisely, and timely, on schemes meant for people’s welfare, he added.

“Last month, we were told (by the finance ministry) that laxity (on spending) won’t be tolerated,” said an official with one of the departments. While some departments have spent funds well and are seeking more funds, a few others haven’t quite done a good job.

The ministries, which are lagging behind in spending include telecom, food processing and sports, which spent only 30-40% of their annual budget in H1FY19. The defence ministry, which spent 57% of its annual budget of `4.04 lakh crore in H1, however, could end up spending a few thousand crores less than budgeted for the full year. In April-November 2018, the Centre has spent nearly 82% of the Rs 55,000 crore budgeted for the rural job guarantee programme in FY19.

In April-October this year, the Centre’s total expenditure was Rs 14,56,593 crore, 60% of BEFY19(nearly at the level of last year) while fiscal deficit was Rs 6,48,583 crore, that is, 104% of BEFY19.

Unlike the UPA government which had resorted to heavy expenditure reductions to keep the fiscal numbers from going awry, the NDA government hasn’t messed up with its original budget estimates much. Except in the FY15, when it retained the interim budget set by the UPA and had later to undertake a big (Rs 1,50,000 crore or 8%) reduction in the budget size, the NDA has ensured that the overall budget estimate is not visibly different from the original projections.

Also read: Larger fiscal deficit can put pressure on the economy

Even though officials were initially toying with the idea of cutting spending by up to Rs 50,000 crore to contain fiscal deficit at budgeted level as revenues have been slower-than-projected, especially indirect taxes, that no longer seems an option.

The government has reiterated that fiscal deficit target would be contained at the budgeted level this year. That could be achieved by not making some payments due like that on subsidies and getting an interim dividend from RBI among other steps. What has made meeting the deficit target difficult is the likelihood of a lower than estimated nominal GDP this fiscal.

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