FinMin to do away with the distinction by FY18

At the meeting, Minister of State for Finance Jayant Sinha highlighted the need to increase social sector spending and capital expenditure while remaining on the path of fiscal consolidation.

By: ENS Economic Bureau | New Delhi | Published: December 9, 2015 1:35:12 am
Finance Secretary Ratan P Watal addresses the first conference of the state finance secretaries, in New Delhi on Tuesday.   (Source: PTI) Finance Secretary Ratan P Watal addresses the first conference of the state finance secretaries, in New Delhi on Tuesday. (Source: PTI)

The finance ministry is considering redefining the classification of plan and non-plan expenditure as capital and revenue expenditure, finance secretary Ratan Watal said on Tuesday.

“In the backdrop of the abolition of Planning Commission and setting up of NITI Aayog, the classification of expenditure as plan and non-plan is in the way of losing its relevance. If the accounting of expenditure may now be classified broadly under revenue and capital, I think this is where expenditure is focused,” Watal said, while addressing a meeting with state finance secretaries, adding that a committee will be formed to look into the matter.

The finance ministry may also look at the changes required in the cess-based schemes after the proposed Goods and Services Tax (GST) comes into effect, Watal said.

“The cess-based schemes may undergo some kind of changes in the GST if the GST comes into play, when all these schemes have to be phased out. So we have to see how best we can manage these schemes,” he said.

Abolition of distinction between plan and non-plan expenditure was recommended by C Rangarajan in 2011 in a report — Efficient Management of Public Expenditure — in 2011.

Watal said even though the deliberations have already begun in the ministry, the reclassification of expenditure under accounting heads will happen only after the 12th Plan period (2012-17) comes to an end and till that time the current definitions of plan and non-plan expenditure will continue.

At the meeting, Minister of State for Finance Jayant Sinha highlighted the need to increase social sector spending and capital expenditure while remaining on the path of fiscal consolidation.

He added that the macro-economic indicators have shown positive trends and the structural reforms undertaken by the government have started contributing to sustainable growth through participation of states.

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