Concerned over the rising fiscal deficit, the Planning Commission has asked government ministries and departments to limit the increase in Plan outlay during 2012-13 and subsequent years of the 12th Plan period to 15%.
The proposals should take into account three scenarios under which the increase in annual plan expenditure during the 12th Plan (2012-17) should be envisaged at 5%, 10% or a maximum of 15%, a move that may hit social sector schemes like rural employment guarantee programme.
"The Commission has asked all ministries to restrain from proposing more than 15% increase in the Plan expenditure," a source privy to the development said.
According to the official, "the directive from the Planning Commission has come in view of the mounting fiscal deficit this fiscal which is likely to be over 5% of Gross Domestic Product (GDP) as against the target of 4.6%".
The Commission, the source said, has also asked all ministries to give three different scenarios of the Plan expenditure proposals, one exclusively for the next fiscal and the other for the entire 12th Plan period beginning April 1, 2012.
"The central ministries have been asked to provide three different scenarios having 5, 10 and 15% increase," the source said.
The government had provided Rs 4,41,547 crore as gross budgetary support (GBS) for plan schemes in 2011-12 which was 18.35% higher than the budget announcement of Rs 3,73,092 crore for 2010-11.
As per the Approach document to the 12th Plan, the GBS for 2012-13 should be raised by 14.68% to Rs 5,06,387 crore.
The Approach document, which was approved in October by the country's apex planning body, National Development Council headed by the Prime Minister, has also made a strong case for keeping the expenditure in check to bring down fiscal deficit to 3% level by 2016-17, the terminal year of the 12th Plan.
It pegged the GBS for 2013-14 and 2014-15 at Rs 5,83,305 crore and Rs 6,71,612 crore, projecting an increase of 15.19 and 15.14%, respectively.
The document has projected 22.9 and 23.16% growth in the GBS in 2015-16 and 2016-17 at Rs 8,25,421 crore and Rs 10,16,635 crore respectively.
Cautioning against substantial increase in GBS, the approach document said it could lead to deterioration in the fiscal situation as revenue increase will only be marginal during the 12th Plan period.
The document has projected deceleration in non-tax revenue collection from 1.4% of GDP in 2011-12 to 0.88% in 2016-17. The net revenue for the Centre is projected to increase by a meagre 1.51 percentage point to 8.91% of GDP in 2016-17, from 7.4% in 2011-12.
The paper further suggested that the contribution of non-debt capital receipts (mainly from disinvestment proceeds) is expected to fall.
This is partly because the scope for disinvestment will be limited unless the government decides to bring down its equity in state-owned companies to below 51%.