Economy

Govt’s likely belt tightening leaves experts worried

Shishir Sinha New Delhi | Updated on September 07, 2021

Preparation for the Budget by the Finance Ministry is set in motion with issuance of the Budget circular.   -  Getty Images/iStockphoto

Lower RE, truncated allocation may leave growth under-fuelled, they fear

With Budget-making exercise set to kick off soon, it is likely that central ministries/departments may be set lower revised estimates for the current fiscal (2021-22) along with a lower allocation for the next fiscal (2022-23).

Experts say this may be good in terms of containing the fiscal deficit, but certainly not good for the economy.

“Expenditure in the first four months has been lowered. Then, there is expenditure cap for 82 out of 101 demands for grant in July-September quarter.

“All these indicate expenditure could be lower for the full fiscal, which, in turn, will bring down revised estimates and new allocations under many of the demands/appropriations,” a senior government official told BusinessLine.

 

The Budget circular

The official explained that normally the first estimate is based on the expenditure trend of six months and the revised estimate is prepared based on the expenditure till November.

Preparation for the Budget by the Finance Ministry is set in motion with issuance of the Budget circular.

The Budget Division of Economic Affairs Department issues this circular between the third and fourth week of September or by the first week of October.

The circular sets the timeline for submission of estimate, pre-Budget consultations with Ministries and other stakeholders and finalisation of revised estimate for the current fiscal and budget estimate for the next fiscal, besides others.

Though officials feel the expenditure curbs should not continue beyond September, given the revenue buoyancy, the Finance Ministry’s stand will be known by the end of this month.

In a normal situation, there are not many restrictions during the first three quarter either for Quarterly Expenditure Plan (QEP) or Monthly Expenditure Plan (MEP).

However, for the January-March quarter, there are caps of 33 per cent and 15 per cent of Budget Estimate for the quarter and the month of March, respectively.

Buoyant revenue growth

Experts feel given the growth requirement, expenditure should be enhanced.

DK Srivastava, Chief Policy Advisor with EY India, said revenue growth has been good and there is need to accelerate expenditure to boost growth.

“Any estimate for expenditure through finalisation of RE or BE should not be based on arithmetic, but on the economic reality,” he said, while stating that expenditure should not become the yardstick for finalising allocation.

Devendra Kumar Pant, Chief Economist with India Ratings & Research, feels based on the government’s expenditure management guidelines and actual expenditure till July, the Centre’s expenditure in FY22 will be lower than budgeted.

“On the other hand, FY22 year-to-date revenue collection has been buoyant and FY22 fiscal deficit may be significantly lower than budgeted,” he said.

Published on September 06, 2021

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