PlanCom seeks rise in budgetary support

To arrive at middle ground, FinMin suggests shifting some non-Plan expenditure to Plan expenditure

Even as the finance ministry sets about going on an austerity drive to cut government expenditure, the Planning Commission has sought a hefty 132 per cent rise (at current prices) in the gross budgetary support (GBS) for the 12th Five-Year Plan, estimated at about Rs 37 lakh crore, over the commission’s estimated GBS for the 11th Plan. This, the commission said, was to accelerate inclusive growth.

The document for the 12th Plan, which started on April 1, is in the final stages of preparation. It is expected to be sent for approval by the inter-planning commission meeting around July.

However, given the strained financial resources, the finance ministry is believed to have not agreed entirely with the suggested rise. To arrive at middle ground, the finance ministry has suggested shifting some of the non-Plan expenditure to Plan expenditure in the 12th Plan. It has suggested that some traditional non-Plan expenditure heads like bank recapitalisation and bailout of Air India be included in Plan expenditure.

“We are in the midst of discussions with the finance ministry to arrive at a consensus on the rise and also on the items that could be included in Plan expenditure,” a senior Planning Commission official directly involved in the process told Business Standard.

Officials said it should be noted that austerity measures would primarily aim at cutting non-Plan expenditure, while the Planning Commission was asking for increasing Plan expenditure. Also, austerity measures were generally effective for a year, while the Planning Commission was asking for an increase in the entire five-year period of the 12th Plan, they added.

Finance Minister Pranab Mukherjee had yesterday said in the Rajya Sabha he would announce austerity measures to meet the pegged fiscal deficit level of 5.1 per cent of the gross domestic product in the current financial year, compared with 5.9 per cent in 2011-12. He, however, did not specify what these measures would be.

The Planning Commission official said if everything worked as planned, the final GBS figure would be known very soon. The sought increase, officials said, was on account of the focus the Commission planned on education, tribal affairs, water and health sectors during the 12th Plan. The GBS is the amount of funds the Centre is required to allocate to meet the Plan expenditure.

The extra funding is more than double of what the Planning Commission had estimated for the 11th Plan (2006-07 to 2011-2012—Rs 16,07,997 crore at current prices).

Compared to the Planning Commission’s GBS estimates, the Budget generally under-provides. For example, for 2011-12, the Planning Commission had estimated GBS at about Rs 506,873 crore, but the Budget provided only Rs 3,21,406 crore, about 58 per cent less.

Compared to the 11th Plan GBS of Rs 1421,711 crore, the sought rise would be about 185 per cent (at constant prices of 2006-07).