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Sunday, October 24, 2021

To give growth a push, FinMin pulls back spending restrictions

As a cash management exercise, the government had earlier asked various ministries and departments (in category B) to “restrict the overall expenditure within 20 per cent of BE 2020-21 in Quarter 2 (July to September, 2021)”.

By: ENS Economic Bureau | New Delhi |
Updated: September 25, 2021 2:39:56 am
The government did not impose any spending restrictions on the Ministries of health, rural development, railways, agriculture, MSME (micro, small and medium enterprises) — the ministries and department in the Category A specified by the Finance Ministry.

With government revenues picking up, alongside the economic recovery, the Finance Ministry on Friday removed the expenditure curbs imposed on various ministries for the July-September quarter. As a cash management exercise, the government had earlier asked various ministries and departments (in category B) to “restrict the overall expenditure within 20 per cent of BE 2020-21 in Quarter 2 (July to September, 2021)”.

The government did not impose any spending restrictions on the Ministries of health, rural development, railways, agriculture, MSME (micro, small and medium enterprises) — the ministries and department in the Category A specified by the Finance Ministry. Expenditure curbs were imposed on demands/appropriations related to ministries and departments such as civil aviation, home, labour, mines, power, telecom and post, consumer affairs, fisheries, revenue, economic affairs, financial services and heavy industries, among others, in Category B.

The Finance Ministry has now removed the restriction on limiting the expenditure to 20 per cent of Budget Estimates 2020-21 in July-September quarter. Ministries and departments are now permitted to spend as per their approved monthly and quarterly expenditure plans. Also, restrictions imposed on bulk expenditure items of Rs 200 crore and above have also been removed for Budgeted capital expenditure for remaining part of the year.

As economic recovery picks up, the government has a better handle on its finances and revenues. Plus spending by the government, especially capital expenditure, is needed to sustain the recovery. “The government’s spending had contracted by 5 per cent in April-July 2021 on a YoY basis, and stood at 29 per cent of the Budget Estimates. With the withdrawal of the expenditure management guidelines, we anticipate that spending will gather pace in the second half of this year, which will be critical to unleash animal spirits and drive a faster recovery in economic activity,” said Aditi Nayar, chief economist, Icra.

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