Govt spending up 55% in April-May

Early Budget results in front-loading expenditure

Government spending rose 55 per cent in April-May over the same period a year ago. This visible effect of advancing the date of the Budget this year — on February 1 instead of the usually end of the month — could provide a jumpstart to the economy.

The completion of legislative approval for annual spending by mid-March helped ministries and departments plan their expenditure from April 1 instead of later in the year.

“There is a substantial increase in expenditure in the first two months of the fiscal year,” Finance Secretary Ashok Lavasa told Business Standard.

Government spending grew by 13 per cent, year on year, in April-May 2016. Expenditure during the two months touched Rs 4.6 lakh crore, which is 21.3 per cent of the Budget Estimate for 2017-18, against Rs 2.9 lakh crore in April-May 2016, which was 15 per cent of that year’s Budget Estimate.

Official data on the government’s accounts will be released on Friday.

The Budget for 2017-18 was advanced by a month to February 1 and annual spending plans and tax proposals were approved by Parliament before the beginning of the fiscal year on April 1.

Capital expenditure that essentially goes into infrastructure creation and other assets rose 63 per cent in April-May to Rs 54,000 crore from Rs 33,000 crore in the same two months a year ago.

Till last year expenditure approval used to coincide with the onset of the monsoon, leading to back-loading of programmes, which remained inactive in productive pre-monsoon months.

“We want the budgetary exercise to be over and the Finance Bill to be passed and implemented by April 1 rather than by June because then the monsoon sets in and, effectively, expenditures start in October,” Finance Minister Arun Jaitley had said earlier.

An official said the early start to spending had helped social sector schemes in agriculture, poverty alleviation and education.

Sources said the front-loading of expenditure had widened the fiscal deficit in the first two months to 69 per cent of the Rs 5.46 lakh crore Budget Estimate for 2017-18, against 43 per cent in the same period a year ago.

The fiscal deficit, the difference between the government’s revenue and expenditure, rose to Rs 3.8 lakh crore in April-May from Rs 2.3 lakh crore in April-May 2016. Total receipts touched Rs 78,000 crore against Rs 69,900 crore in the comparable period a year ago.

Madan Sabnavis, chief economist at Care Ratings, said the higher spending would provide a buffer to the economy after a slowdown in the third and the fourth quarters of 2016-17 brought on by demonetisation. “In addition, the goods and services tax will be a major disruption in the forthcoming quarter as many companies slowed down production in June,” he said.