In Q4 last year, the government lowered spending ceiling from 33% to 25%, keeping in mind the weak cash position of the government.
An analysis by FE revealed that despite the three rounds of stimulus measures announced so far, the FY21 Budget size would at best be the same as the budget estimate (BE) of Rs 30 lakh crore.
As the Union Budget FY22 preparations get underway, annual budget outlays for the current year have been revised downwards for most ministries, barring two notable exceptions of the ministries of rural development and food and consumer affairs.
The spending cuts, as reflected in the revised estimates (REs) for the ministries, are steep in most cases.
The squeeze will also reflect on the expenditures by social sector and welfare ministries in the current fiscal. While new schemes requiring substantial budgetary spending have been unveiled under the stimulus packages – like the PM Garib Kalyan, Anna and Rozgar (EPF support) Yojanas — other centrally schemes are bearing the brunt.
An analysis by FE revealed that despite the three rounds of stimulus measures announced so far, the FY21 Budget size would at best be the same as the budget estimate (BE) of Rs 30 lakh crore. It could even be lower.
As the chart shows, all ministries except four – rural development, food and consumer affairs, agriculture and labour – spent less than 50% of the annual outlay for FY21 in the first half of the year (April-September). Even among the four ministries that stood apart from the rest (most of the post-pandemic welfare schemes are routed through these ministries), the ministry of agriculture and farmer welfare will also likely see the revised outlay to be a fifth lower than the BE of Rs 1.43 lakh crore. This is because of estimated savings of Rs 15,000 crore under the PM-Kisan cash transfer scheme, from the original budget of Rs 75,000 crore (BE) and another around Rs 15,000 crore to be saved under smaller centrally sponsored schemes being run by the ministry, official sources said.
The labour ministry, which is implementing the Pradhan Mantri Garib Kalyan Yojana and EPF support scheme for job creation, has been told that its RE will be around the same as the BE, which effectively means a cut of around 30% from the level corresponding to the stimulus announcements. The ministry’s BE allocation was around Rs 12,000 crore for FY21 and it was supposed to get an additional Rs 4,800 crore for the PMGKY component. On the top of it, the third tranche of Aatmanirbhar Bharat stimulus package which included Rs 6,000-crore Rozgar Yojana subsidy was announced after the finance ministry’s RE discussions with the labour ministry in October. The ministry is keeping its fingers crossed over whether additional resources will be provided or other schemes would have to be slashed in H2.
Of course, the ministry of consumer affairs, food and public distribution will see the RE to be over 50% higher than the BE of Rs 1.24 lakh crore. Even this ministry, which oversees the PM Anna Yojana would have to adjust to deferment of part of this year’s dues to FCI and/or a fresh loan arrangement. Only half the estimated outlay of Rs 1.41 lakh crore for the Anna Yojana phases I and II, which have benefited crores of people during the pandemic, is likely to be provided under RE.
Ministries with smaller budgets are also seeing budget cuts. Since expenditure curbs between 20% and 40% were imposed between April and October of this fiscal, many ministries have managed to spend only 35% instead of about 58-60% in the first seven months of the year. However, the rural development ministry, which has been at the forefront of implementing some of the pro-poor measures such as enhanced allocation of about Rs 50,000 crore for job guarantee programme, will see its RE to be 40% higher than BE.
In an office memorandum dated October 29, the finance ministry has asked ministries to stick to their REs for the remaining part of the year (November-March). However, these are subject to quarterly ceilings (25% of full-year allocation) and those ministries who have spent less might fail to utilise even RE allocation unless relaxations are given. In Q4 last year, the government lowered spending ceiling from 33% to 25%, keeping in mind the weak cash position of the government.
Even amid talks of another round of fiscal stimulus, the Centre is looking at sticking to the enhanced gross borrowing limit of Rs 12 lakh crore for FY21. Its tax revenues are under-performing — net tax receipts (post-transfer to states) were down 24.5% on year in H1, even as excise receipts grew 34%. Tax receipts are expected to improve in H2, and senior officials say the internal target is to reach at least last year’s level in absolute term.