Plan expenditure may take fiscal consolidation hit

Increase in Budgetary allocation likely to be only 5.8%, the lowest in six years

The rise in Budgetary allocation for the government’s major schemes is likely to see a squeeze this year. Given the resource constraints and threats that India’s sovereign ratings could be downgraded to ‘junk’, Budget 2013-14 is likely to allocate for Plan expenditure only 5.8 per cent more funds than Budget 2012-13 estimates — the lowest rise seen in recent years.

The Budget was likely to peg Plan expenditure for next financial year at Rs 5.51 lakh crore, compared with Rs 5.21 lakh crore estimated for the current year, officials said. The Planning Commission had wanted a rise of up to 15 per cent, but the finance ministry’s concerns over fiscal consolidation could have prevailed over the development needs of the economy as flagged off by the commission.

Plan expenditure is the government spending on the government’s major programmes such as the Mahatma Gandhi Rural Employment Guarantee Scheme, National Rural Health Mission, Bharat Nirman, etc. It also includes the Centre’s assistance to various states’ and Union Territories’ Plans.

Analysts say the move is surprising, as the forthcoming Budget would be the last full-fledged one of the United Progressive Alliance government in its second term. However, the government is likely to make up for the low increase in Plan expenditure by creating space for its ambitious National Food Security programme in the run-up to the 2014 general polls.

 

Finance Minister P Chidambaram has already given a five-year road map to bring down the Centre’s fiscal deficit to 4.8 per cent of gross domestic product (GDP) in 2013-14, from an estimated 5.3 per cent in the current financial year; and ultimately to three per cent by 2016-17, the concluding year of the 12th Five-Year Plan.

At 5.8 per cent, the increase in the government’s allocation for development expenditure in 2013-14 could be lower than those in the five preceding years. The lowest before this was in 2010-11, at 14.74 per cent, which looked muted because of a high base the previous year. In 2009-10, the rise was a whopping 33.59 per cent because the global financial crisis period of 2008-09 had seen a steep increase of 16.25 per cent over Budget estimates in revised estimates, as the government stepped up public expenditure to create demand in the wake of the slowdown.

It should be noted that revised estimates of 2012-13 might see a cut of up to 20 per cent in Plan expenditure from Budget estimates. If that happens, the final figure would come down to Rs 4.17 lakh crore.

So, compared with revised estimates, the 2013-14 Plan expenditure might still see a jump of almost 32 per cent.

The whole exercise would make it difficult for the government to meet its projections of Rs 35.69-lakh-crore Plan expenditure in the 12th Plan (2012-13 to 2016-17).