Revenue crunch: Govt mulls funds transfer from less important to key depts

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Published: November 4, 2019 4:14:17 AM

The total expenditure touched 53.4% of the budgeted level of Rs 27.86 lakh crore for the full year in the first half of FY20.

economy, india economyThe ministry initiated the process of pre-Budget consultations earlier this month and in some of these meetings this idea of transferring the unutilised funds was discussed.

Faced with little choice but to beat an economic slowdown with generous expenditure, a resource-strapped government wants to divert unspent funds allocated from relatively less important departments to the ‘priority’ ones, mainly infrastructure, an official source told FE.

At the same time, some infrastructure ministries/ departments that have not spent much so far this fiscal are being nudged to improve their expenditure level, according to the source.

For instance, the road transport and highway ministry spent just 62% of the budgeted target in the first half of this fiscal, against 75% a year before. Similarly, expenditure of the civil aviation ministry stood at only 25% until September end, against 81% in the same period last fiscal.

The government intends to stick to the FY20 fiscal deficit target of 3.3% of GDP despite lower-than-expected goods and services tax collection and an estimated shortfall of Rs 1.45 lakh crore in gross tax revenue due to the recent cut in the corporate tax rate alone. Given the resource constraints, it’s important to better distribute the available funds, said the source.

While the precise estimates of the cut in funds for select departments would be firmed up once supplementary demands are finalised by the end of November, those that have not spent much in the first half of FY20 include coal, panchayati raj, Jal Shakti, statistics, tourism and women and child development.

Importantly, the agriculture ministry spent only 39% of its full-year budget allocation of Rs 1.39 lakh crore until September end, against 64% a year before, mainly due to lower outgo on account of the PM-Kisan scheme. While as much as Rs 75,000 crore has been budgeted for this income support scheme for the entire FY20, the final outgo is expected to be lower by Rs 20,000 crore or thereabouts. This saving is expected to be utilised by other key departments.

The coal ministry spent only 40% of the full-year Budget allocation of Rs 1,105 crore in the April-September period, against 68% a year earlier, according to the latest data with the Controller General of Accounts. The expenditure of drinking water and sanitation department stood at 45% of the Rs 20,016 crore earmarked for FY20, compared with 64% a year before. Similarly, the expenditure level of the ministry of child and women development was to the tune of 46% of the budgeted Rs 29,165 crore until September, against 52% in the same period last fiscal. Spending by the statistics and programme implementation ministry stood at just 33% of Rs 5,231 crore, against 55% a year earlier. The tourism ministry spent only 41% of Rs 2,189 crore, against 50% a year earlier, and that of the panchayati raj ministry was only 19% of Rs 871 crore, compared with 38%.

The total expenditure touched 53.4% of the budgeted level of Rs 27.86 lakh crore for the full year in the first half of FY20. The funds would be transferred to those departments where the multiplier effect was high, the source said.

The finance ministry believes that higher-than-budgeted disinvestment proceeds, extra central bank dividend ofRs `58,000 crore (and a potential interim one) and lower outgo under the PM-Kisan scheme in FY20 will substantially make up for the potential tax revenue shortfall.

The ministry initiated the process of pre-Budget consultations earlier this month and in some of these meetings this idea of transferring the unutilised funds was discussed. The department of expenditure, along with the economic affairs department, would take a final call on the precise amount of the transfer after assessing the department-wise spending pattern, the source said.

The economic growth collapsed to a 25-quarter low of 5% in the April-June period, as expansion in private consumption expenditure, a key driver of gross domestic product, crashed to just 3.1%, against 7.2% in the March quarter. Thanks to general elections and the accompanying uncertainties in policy directions, the push from government consumption expenditure to prop up the economy, too, was limited, as it rose just 8.8% in the June quarter, against 13.1% in the previous three months. To make up for the low expenditure in the first quarter, the government has since been trying to improve spending and help stimulate growth.

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