Policy

Finmin withdraws expenditure curb, economy to get boost

Shishir Sinha New Delhi | Updated on September 24, 2021

Move seen as precursor to preparation of revised estimate for current fiscal

 

With tax collections showing a rising trend, the Finance Ministry has withdrawn expenditure curb on various Central Ministries and Departments with immediate effect, ending the criticism on lower expenditure by the government.

On June 30, the Ministry had issued guidelines for putting curbs on 82 out of 101 demands for grants related with various Central Ministries and Departments for a three-month period starting July 1. According to an office memorandum (OM) issued by the Economic Affairs Department of the Finance Ministry, the circular now stands withdrawn with immediate effect.

Accordingly, all Ministries/Departments are now permitted to spend as per their own approved monthly expenditure plan/quarterly expenditure plan, during the remaining part of the financial year, the OM said. It further stated that instructions related with regulating bulk item of expenditure (equal to or more than ₹200 crore) are relaxed for those pertaining to budgeted capital expenditure for the remaining part of this financial year.

 

Positive impact

A senior government official termed the move as very bold. “This move needs to be seen as a precursor to the preparation of revised estimate (RE) for the current fiscal. Because of the curb imposed in June, various Central Ministries and Departments were apprehending lower expenditure; as on date their expenditure was low. With the relaxation, Ministries/Departments can expect better RE and positive impact on Budget allocation for the next fiscal,” he explained to BusinessLine.

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 has been set in motion with the issuance of the Budget circular and meetings with various Ministries and Departments will begin from October 12.

Before the constitution of the Co-operation Ministry, there were 101 demands/appropriations related with 55 central Ministries and Departments. In June, these were grouped into two. The first group comprising 19 demands/appropriations had no cap. These are related with Departments such as Health & Family Welfare, Pharma, Fertiliser and Food and Ministries such as Railways, MSME and others.

The second group had 81 demands/appropriations related with Ministries and Departments. These were asked to restrict the overall expenditure within 20 per cent of the BE 2021-22 in second quarter. These include Ministries such as Civil Aviation, Home, Labour, Mines, Power beside others and Departments like Post, Consumer Affairs, Telecommunication, Fisheries, Heavy Industries besides others.

Expenditure plan

A Central Ministry or a Department is required to make monthly or quarterly expenditure plan and submit it to the Finance Ministry. Alhough quarterly expenditure is informally set at 25 per cent, for the first nine months, it is the discretion of the specific Ministry or Department to decide how much to spend. For the fourth quarter, it has to follow 33 per cent of the BE for the quarter and 15 per cent for March as prescribed by the Finance Ministry.

According to data for April-July period, the total government expenditure was just 29 per cent of the budget estimate. It also showed that 51 demands registered an increase on yearly basis while 44 demands recorded decline. On the other hand, net direct tax collection saw a surge of 73 per cent as on date in comparision to corresponding period of last fiscal.

Published on September 24, 2021

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