Expenditure may increase 20% on subsidy bill, loan waiver

EXPENDITURE: Revised estimates of total expenditure pegged at Rs 9,00,953 crore in 2008-09.

The government on Monday estimated its total expenditure to increase by 20 per cent in the current fiscal due to higher subsidy bill and farm loan debt waiver scheme.

Presenting the Interim Budget in Parliament, Finance Minister Pranab Mukherjee said the revised estimates of total expenditure were pegged at Rs 9,00,953 crore in 2008-09, an increase of around Rs 1,50,000 crore compared with the initial estimates.

However, in fiscal 2010, the total expenditure is expected to increase only by around Rs 52,000 crore (or 6 per cent) to Rs 9,53,231 crore. Nearly two-thirds of the increase will be on account of higher interest payments. This is because the government borrowing is increasing at a rapid pace.

The government’s total outstanding liabilities at the end of March 2010 are expected to touch 58.2 per cent of India’s GDP, as against the target of 51.1 per cent by March 2012.

With the economic growth slowing down to 7.1 per cent in the current fiscal as against 9 per cent plus rate for three years up to March 2008, the government is planning to increase public investment to boost economic demand.

Analysis of current financial year numbers reveals that capital expenditure, which creates productive assets, is expected to increase by only 5 per cent as compared to the Budget estimates, while revenue expenditure has increased by 22 per cent.

This is mainly on account of the subsidy bill of the exchequer nearly doubling to Rs 1,29,242 crore as against the Budget estimates of Rs 71,430 crore in fiscal 2009. While an increase of around Rs 10,000 crore is on account of food subsidy, the bulk of the increase is contributed by increase in the fertiliser subsidy because of increase in prices of petroleum products.

This subsidy bill does not include Rs 95,942 crore worth of bonds issued to oil and fertiliser companies.

However, the total subsidy bill for the next fiscal has been revised downwards to Rs 95,579 crore because the government expects the international crude oil prices to remain below $ 75 a barrel.

In terms of total budget support of central Plan, the portion of Plan expenditure supported out of the budget, is estimated at Rs 1,79,954 crore in current fiscal as against the earlier estimate of Rs 2,04,128 crore.

The increase of Rs 24,174 crore was mainly on account of increased expenditure of Rs 30,100 crore towards rural employment guarantee scheme. Few other schemes spent less than their earlier budgeted amount.

Budgetary plan support for next fiscal is projected to increase only by Rs 4,322 crore, but the finance minister said there was a need to spend between 0.5 and 1 per cent of GDP to boost economic demand. This, he said, the next government should focus on.

The impact of implementing the Sixth Pay Commission recommendations on the government finances is estimated at Rs 19,094 crore in the current fiscal. In 2009-10, the combined cash outgo on this count is expected to cross Rs 40,000 crore.