Economy

Centre to go for curtailing avoidable expenditure

Shishir Sinha New Delhi | Updated on June 11, 2021

Eyes 20% cut in controllable expenses this fiscal

The Centre has set a target of reducing by 20 per cent the controllable expenditure during current fiscal (FY 2021-22). Officials estimate a saving of ₹1.50-1.60 lakh crore, if it is implemented ‘truly in words and spirits’.

This is second successive year of such an instruction. However, saving is yet to be known when it was done for the first time in FY 21.

“The government has decided that all Ministries/Departments should take steps to curb wasteful/avoidable expenditure and aim for 20 per cent reduction in controllable expenditure,” an Office Memorandum (OM) from Expenditure Department said. With pandemic having the potential to affect the revenue collection, the Finance Ministry is looking for all possible ways to use available resources in best possible way.

The OM further ‘requested’ all the Ministries/Departments to take steps to curtail all avoidable non-scheme expenditure to aim for 20 per cent reduction in controllable expenditure. “Expenditure in 2019-20 may be taken as baseline,” it said. The expenditure related to containment of the Covid-19 pandemic is excluded from the scope of this order, the memorandum said.

Grants-in-aid General

A senior government official explained to BusinessLine that non-scheme expenditure number can be arrived at taking data related with expenses on establishment and Grants-in-aid General. “Normally, Grants-in-aid General consist 40 per cent of other central expenditure,” he said. Based on these and taking 2019-20 as the base, saving could be in the range of ₹1.5-1.6-lakh crore, he estimated.

This memorandum has been sent within three days from the announcement by the Prime Minister Narendra Modi regarding reworked vaccine policy and extension of free foodgrain scheme for 80 crore people till Diwali. It has been estimated that purchase of 75 per cent of vaccine production for free jabs and extension of foodgrain scheme could increase the expenditure by ₹1.45 lakh crore. Though the government is hopeful of meeting the increased expenses with possible tax buoyancy during second half, still official believes saving from expenditure plan as proposed in the budget will give more certainty.

Fiscal deficit

The Union Budget for FY 22 has prescribed total expenditure of over ₹34.83 lakh crore. This comprises over ₹29.29-lakh crore of Revenue Expenditure and over ₹5.54 lakh crore of Capital Expenditure. Fiscal deficit has been pegged at over ₹15-lakh crore which is 6.8 per cent of GDP. Now various agencies estimate that with higher expenditure on account of new announcements and possible lower revenue than estimate, fiscal deficit could go up by 40 basis points.

Though the government says it is too early to talk about possible increase in deficit, but the official said that measures for like curtailing non-scheme expenditure from now onwards will be one tool to keep the fiscal deficit in control.

Published on June 11, 2021

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