Finance Ministry is believed to have suggested to some ministries a reduction of up to 15 per cent in their annual budgets for the current financial year.
The move is aimed at cutting the fiscal deficit, which the government wants to contain at 4.1 per cent of GDP, according to government sources. Fiscal deficit during the last financial year was 4.5 per cent.
Social sector ministries, which have the largest social spending on schemes like MNREGA, are uncomfortable with this move and a discussion is being held with Finance Ministry, a source said.
The proposal is in line with a practice started two years ago when P Chidambaram was the Finance Minster, the official said. At that time, the cuts were effected to the tune of 20 per cent.
Social activists have criticised the government's move to cut allocations for social sector ministries like Ministry of Rural Development, Drinking Water and Sanitation and Panchayati Raj.
They said this will severely affect the implementation of rural job scheme--MNREGA.
"Proposing budget cuts at a time when people are complaining of getting no work or wages and state governments are speaking for fund releases in different parts of the country is illegal, unconstitutional and inhumane," social activist Nikhil Dey said.
Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) enacted in 2005 aims to provide 100 days of work to unskilled poor people living in rural areas.
Rural Development Ministry was allocated a budget of Rs 34,000 crore during the 2014-15 fiscal for the scheme.