To meet fiscal target, govt to compress spending by Rs 60,000 crore

The government is compressing around Rs 60,000 crore worth of expenditure, as it looks to meet a challenging fiscal deficit target of 3.4 per cent of gross domestic product for 2018-19 (FY19).

This compression will include subsidy carry-overs of as much as Rs 35,000 crore, ministries returning unspent amounts of as much as Rs 20,000 crore combined, and capital expenditure (capex) cuts.

The unspent amounts could include Rs 4,000 crore to Rs 5,000 crore not being utilised under the new PM-Kisan scheme, as the Centre is still struggling to disburse sums due to incomplete land records of some states, Business Standard has learnt from senior government officials. 

“We are looking at an expenditure compression of up to Rs 60,000 crore,” a senior official confirmed.

For April-January FY19, the fiscal deficit touched around Rs 7.71 trillion, a staggering 121.5 per cent of the full-year revised target of Rs 6.34 trillion. This means the Centre will need to have a fiscal surplus of Rs 1.36 trillion in the last two months of this year to meet the target. 

While officials expect the goods and services tax numbers to meet the Revised Estimates (RE) and healthy advance tax collections on March 15, there is an admission that some adjustments have to be made on the expenditure side of things. 

To contain the deficit, the axe has fallen on capex, which contracted by 35 per cent in January alone. Capex has been contracting since September 2018. For the first 10 months of this fiscal year, the government has spent nearly 73 per cent of its full-year capex allocation, compared to nearly 97 per cent for the same period last year. 

That means in February and March, the Centre still has some Rs 86,000 crore in pending capex. Officials say not all of it will be spent. “While the Centre won’t freeze capex completely, it will go slow,” said a second official. 

Finance Minister Arun Jaitley, however, has time and again asserted that the deficit target will be met without compromising on capex.

“The finance ministry always tells other departments to return unspent amounts at the end of a year. This year too, one can say that up to Rs 20,000 crore in unspent amounts will be returned,” said the second official.

This will include some Rs 4,000 crore to Rs 5,000 crore from the newly announced flagship scheme, PM-Kisan. The interim Budget 2019-20 (FY20) had allocated Rs 20,000 crore to the scheme for the remainder of this fiscal year. The scheme promises a support of Rs 6,000 annually to small and marginal farmers. The Centre has transferred the first instalment of Rs 2,000 each to 21.8 million farmers in 23 states and one Union Territory.

However, the Centre is still compiling land records and data from states; some states are refusing to play ball because of political reasons. Jaitley publicly expressed his frustration last week. “The spread of beneficiaries is very uneven across states.  Why are some Congress-ruled states and West Bengal not cooperating with PM-Kisan?  Why are they letting down their farmers?” he asked on Twitter.

Jaitley shared a chart which stated that according to the data provided by the West Bengal government, the state has no small and marginal farmers, and Madhya Pradesh has only 298 of them.

As reported by Business Standard earlier, the Centre is likely to roll-over as much as Rs 35,000 crore in combined food, petroleum, and fertiliser subsidies to FY20. The combined fertiliser, food, and petroleum subsidy RE for FY19 is Rs 2.66 trillion.

The petroleum subsidy amount rolled over to FY20 will be around Rs 13,000 crore. Food subsidy could see a roll-over of around Rs 10,000 crore, while fertiliser subsidy rolled over to FY20 may be in the range of Rs 10,000 crore and Rs 12,000 crore.