Budget exercise. FinMin completes inter-ministerial meetings, no substantial cuts expected in allocation for FY23

Finance Ministry has concluded the first set of pre-budget meetings with 54 Central Ministries and Departments. The deliberations have paved the way for the first draft of Revised Estimate (RE) for Fiscal Year 2022-23 (FY23) and indications are that there is not much cut in the budget allocation. The next round of pre-budget consultations with various stakeholders will begin later this month.

The RE will be made public along with Budget Estimate (BE) for Fiscal Year 2023-24 (FY24) when Finance Minister Nirmala Sitharaman will present the new budget. Though date has not been finalized, it is expected to be presented on February 01.

Normally RE for a fiscal year is finalised on the basis of expenditure made in first six months of that year, while BE for next fiscal year is prepared on the basis of expenditure made in first nine month of current year.

Data released by Controller General of Accounts (CGA) has shown that the Centre has spent over ₹18.23 lakh crore during first six months (April-September) period of FY23, which is 12.15 per cent higher than ₹16.26 lakh crore of corresponding period of FY22. However, as a percentage of total budget allocation, expenditure in FY 23 was 46.2 per cent as against 46.7 per cent of FY 22. Figures for nine months to be out at the end of January.

First indication of RE will be reflected in the first set of Supplementary Demands for Grants which will be tabled during the forthcoming winter session of the Parliament expected to take place next month.

Finance Ministry officials say that deliberations in pre-budget meetings with various Ministries and Departments and trends in expenditure during the first six months indicate that there will not be any major cut in the budget allocation. The first set of pre-budget meetings were held from October 10 to November 10.

In fact, the Finance Ministry is hopeful of savings with the help of ‘just-in-time’ release of funds mechanism. This ensures money going to various institutions only when they are ready to spend and after achieving certain milestones and not automatically transferred to their account.  Also, interest earned on funds in accounts opened with RBI and various banks will be collected by the Centre itself, as opposed to the concerned agencies remitting to the Centre.

On higher RE for some Ministries and Departments, official said that there are commitments to provide additional subsidy for fertilisers (₹1.10 lakh crore) and for food (over ₹44 lakh crore). Also, additional funds to be made available for meeting capital expenditure needs of infrastructure ministries like Railways as their spending has been good and they require additional funds.

Despite these allocations, officials are hopeful of limiting the fiscal deficit to the previous estimate of ₹16.61 lakh crore or 6.4 per cent of GDP for FY23.

Next set of pre-budget meetings will be held with stakeholder groups such as industrials, agriculturists, trade unions, economists, etc. later this month. These meetings will be chaired by Finance Minister Nirmala Sitharaman. Inputs received from these meetings along with suggestions received via online will be used to draft the budget proposals for FY24.

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