FinMin asks govt depts not to exceed allocations

As part of its fiscal tightening measures, the finance ministry has asked all government departments not to seek any increase in their allocations for 2009-10 over and above what has already been provided for in the Interim Budget presented on February 16.

The total budgeted expenditure estimates for 2009-10 stood at Rs 9,53,231 crore, including planned and non-planned expenses of the government. This was an increase of nearly 5.8 per cent over the revised estimates of 2008-09. The vote on account had approved expenses only till July-end, although the Budget outlays were for the entire financial year.

“Government departments have been told that they can carry out minor modifications on allocations that were announced, but asked not to exceed the Budget estimates for 2009-10,” said a senior government official in the know.

This is being done as revenue collections have been sinking in the backdrop of the ongoing economic slowdown. The country’s fiscal deficit is expected to surge to 6 per cent of the total output against an estimated 2.5 per cent for 2008-09. In 2009-10, fiscal deficit is expected to touch 5.5 per cent of GDP. A burgeoning fiscal deficit leads to additional government borrowing from the market, which might crowd out private investments.

Meanwhile, Pranab Mukherjee took charge as the finance minister of the country today. Right after reaching North Block, he was greeted by senior officials of the ministry. Thereafter, he had a brief meeting with the officials, where he “took stock of the fiscal situation of the country”.

One of the first calls that Mukherjee made after taking charge was to Defence Minister A K Antony and West Bengal Chief Minister Buddhadeb Bhattacharjee. The discussions were related to deployment of the armed forces to help in rescue and rehabilitation of people affected by cyclone ‘Aila’.

The pre-Budget interaction between government departments and the finance ministry is likely to start the moment respective ministers take charge. “Broadly, the allocations had been already lined up for the departments in the vote on account. Hence, it would not take more than three weeks to finalise the expenses of the government departments,” the official said.

Tax, duty sops unlikely in Budget

Finance Minister Pranab Mukherjee is likely to present the Budget for 2009-10 in the first week of July. The Budget will also have an element of vote on account, which will take care of the government expenses till the Budget is passed by Parliament. This is a standard practice since the government expenditure required for day-to-day expenses has to be approved till the Budget is passed by Parliament.

“This would mostly be a conservative Budget. Tax or duty sops are unlikely,” the official added.

Finance ministry officials are discussing the pros and cons of announcing a fresh fiscal stimulus package in the Budget. There is, however, a view that the economy is not in any immediate need of fiscal package as the previous stimuli have already begun to have a positive impact.