To boost spending, govt seeks parliament nod to spend extra Rs 853 billion

This extra spending is unlikely to impact the country's fiscal deficit target.

The government on Thursday sought Parliament’s nod for a net additional cash spending of Rs 853.15 billion in the current financial year ending this month, 70 per cent of which would go towards compensating states for revenue loss suffered after the roll-out of the goods and services tax (GST).

Minister of State for Parliamentary Affairs Arjun Ram Meghwal moved the fourth batch of Supplementary Demands for Grants for 2017-18 in the Lok Sabha. The additional expenditure is being incurred to match the revised estimates provided in the Budget and will not impact the fiscal deficit target of 3.5 of gross domestic product (GDP).

When grants authorised by Parliament fall short of the required expenditure, an estimate is presented before the House for supplementary grants, before the end of the financial year.

According to the latest Supplementary Demands for Grants, gross additional expenditure would be over Rs 9.06 trillion, and this would be matched by over Rs 8.21 trillion savings by various ministries and departments.

The net cash outgo from the exchequer would aggregate to Rs 853.15 billion, mentions the finance ministry document. A bulk of the net cash outgo would be spent to compensate states on account of revenue loss due to the implementation of the GST as well as for phasing out the Central Sales Tax (CST). The GST was rolled out on July 1.

A total of Rs 612.15 billion, about 71 per cent of Rs 853.15 billion, has been earmarked for the Department of Revenue. This includes Rs 589.99 billion to be paid for revenue loss to states on account of revenue loss after the GST implementation and Rs 13.84 billion to be paid as CST compensation.

Another major spending head is Rs 150.65 billion towards grants in aid and creation of capital assets under various schemes, while Rs 92.60 billion has been earmarked for paying pensions to defence personnel. Besides, Rs 57.21 billion would be spent on meeting expenditure towards interest payment on market loans and treasury bills.

In the Union Budget 2018-19, presented on February 1, Finance Minister Arun Jaitley revised the fiscal deficit target for the financial year ending on March 31 to 3.5 per cent of GDP, from the previous target 3.2 per cent. For 2018-19, he projected a fiscal deficit of 3.3 per cent of GDP as opposed to 3 per cent previously announced.

The government is likely to introduce amendments to the Fiscal Responsibility and Budget Management (FRBM) Act in the ongoing Budget Session of Parliament, specifying the fiscal consolidation road map. According to this road map, the fiscal deficit will be lowered to 3.3 per cent in the next fiscal year starting April 1, 3.1 per cent in 2019-20, and 3 per cent by 2020-21.

Spending plan

• Rs 853.15 billion sought by govt for net additional spending in 2017-18
• Rs 9.06 trillion will be gross additional expenditure
• Rs 590 billion will go towards compensating states for revenue loss after GST implementation
• Rs 13.80 billion will be paid as Central Sales Tax compensation
• Rs 150.60 billion earmarked for grants in aid and creation of capital assets
• Rs 92.60 billion to be spent towards defence personnel pension