New Delhi: The finance ministry has barred all
ministries and departments from proposing new schemes in FY21, barring those
announced under the Pradhan Mantri Garib Kalyan Yojana and the Atmanirbhar
Bharat Abhiyan, to cope with spending needs due to the Covid-19 crisis amid an
economic slump. Schemes already approved for this fiscal year have also been
put on hold until the end of March 2021 as per the latest directive from
Department of Expenditure in the finance ministry that ET has seen. “It may be appreciated
that in the wake of Covid-19 pandemic, there is an unprecedented demand on
public financial resources,” the directive said.
“There’s a need to use resources prudently in accordance with emerging and changing priorities,” it said. The government’s tax revenues have fallen because of the lockdown imposed to curb the outbreak, putting further strain on the budget. This is the second such expenditure check due to the coronavirus outbreak after curbs on spending in the first quarter were announced on April 8. First-quarter spending by most ministries and departments was restricted to 15-20%. This was followed by a freeze on dearness allowance increases for government employees.
The government has raised its borrowing target for the
current year to Rs 12 lakh crore from Rs 7.8 lakh crore estimated in the
budget. Additional spending on account of relief packages announced to counter
the social and economic impact of the Covid-19 outbreak is pegged at 1% of GDP
by experts. The latest move has come after the expenditure department continued
to receive many new proposals for ‘inprinciple’ approval. The ministry has
disallowed the release of additional funds through budgetary provisions by
re-appropriation to schemes that do not comply with the order. “This shows the
fiscal constraint the government is facing,” said NR Bhanumurthy, professor at
the National Institute of Public Finance and Policy.
Revenues are going to fall sharply and, given the situation, this is one way of containing expenditure, Bhanumurthy said. “It means they are not going to spend on anything they passed in the FY21 budget announced in February,” he said. The fiscal deficit swelled to 4.6% of GDP in FY20, exceeding the 3.8% target. Experts project this year’s deficit will widen to 6-7% against a target of 3.5%. Economists have called for a re-evaluation of the budget numbers considering the drastic change in the situation between now and four months ago due to the coronavirus outbreak.
Source : PTI