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Tuesday, September 21, 2021

Govt’s FY20 spending seen lower by Rs 2 lakh crore; sharpest cut since FY15

The Centre is set to cut annual budgetary expenditure for current fiscal by nearly `2.2 lakh crore or 8 per cent from the Budget Estimate.

By: ENS Economic Bureau | New Delhi |
Updated: January 6, 2020 3:31:01 am
Modi Govt, Govt spending, Govt spending limit, Nirmala Sitharaman, Indian express The axe could fall on spending across most ministries.

With tax revenue growth lagging the required rate by a wide margin, the Centre is all set to cut the annual budgetary expenditure for the current financial year by nearly Rs 2.2 lakh crore or 8 per cent from the Budget Estimate (BE). The axe could fall on spending across most ministries, though budgeted capital investment may remain intact.

With actual expenditure this year likely to be around Rs 25.6 lakh crore, or 92 per cent of the BE, the spending reduction from BE level this year could be the sharpest since FY15, when the new Modi 1.0 government retained the (slashed) expenditure level of 92.7 per cent of BE estimated by the previous UPA government in the interim budget.

While the NDA dispensation has been focused on keeping the headline deficit numbers under check, unlike its predecessor, it has also largely achieved it without effecting huge spending cuts (it is another manner, off-Budget financing of committed government expenditure increased sharply during the NDA regime).

The spending curbs being imposed now to avoid a big fiscal slippage would, however, weaken the one pillar of the economy; government expenditure, that has been holding the fort for other constituents of the economy like private investments/consumption and exports that have lost steam. Notably, the slashing of the Centre’s budget spending comes at a time when state governments have also reined in their expenses in the wake of revenue shortfall.

An office memorandum (OM) issued by the Department of Economic Affairs, dated December 27, states that expenditure in the March quarter of FY20 would be restricted to 25 per cent of BE against the norm of 33 per cent and that spending in March should not exceed 10 per cent of BE compared with the norm of 18 per cent. “Considering the fiscal position of the government in the current financial year, it has been decided to cap the expenditure in the last quarter /last month of the current financial year,” the DEA said in the OM. —FE

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