Eye on fiscal deficit: Govt tells ministries to keep expenses in check

Departments to seek additional funds only for unavoidable expenditure

Ahead of the Budget session of Parliament, the finance ministry on Wednesday asked departments and ministries to restrict their expenses within the allocated limits. They have been advised to seek additional funds only for unavoidable expenditure. This move is to keep the fiscal deficit within the target of 6.8 per cent for FY22.

Inviting proposals for the third and final batch of supplementary demands for grants for FY22, the department of economic affairs, in a memorandum, said departments and ministries should only propose additional expenditure in cases where advance from the contingency fund has already been granted. They may also do so for payments against court orders which cannot be postponed and cases in which the finance ministry has specifically advised to propose supplementary demand. And, also for additional funds immediately required that can be met by re-appropriation of savings but require immediate Parliament approval.

“All the ministries/departments have been requested to contain expenditure within the approved RE (revised estimates) ceilings,” it added.

The finance ministry said the proposal for supplementary demand for grants may be projected after a thorough and objective assessment of additional funds required. “While processing proposals for supplementary grants, the grant controlling authority must invariably identify savings available within the grant so that the infructuous or inflated supplementary demands are weeded out and the eventuality of surrender after obtaining supplementary grant is avoided,” the communication said.

The Public Accounts Committee of Parliament had earlier expressed displeasure over cases of excess expenditure, under spending and wrongful appropriation of funds due to bad planning, lack of foresight and ineffective monitoring while preparing budget estimates as well as supplementary demands.

During the winter session of Parliament last month, the government had sought approval for gross additional spending of Rs 3.7 trillion for the current fiscal year as part of the second supplementary demands for grants. While the net cash outgo was around Rs 3 trillion, the remaining amount was proposed to be met from savings of government departments and ministries.

During the first supplementary demands for grants for FY22 in July last year, the government had sought nod for gross additional spending of Rs 1.87 trillion while the net cash outgo was only Rs 23,675 crore.

The government has set a target of 6.8 per cent fiscal deficit for FY22.

Soumya Kanti Ghosh, group chief economic adviser, State Bank of India, in a research note released on Wednesday, said fiscal deficit for FY23 could be lower in the range of 6.5-6.8 per cent ahead of the Union Budget.

“If disinvestment of LIC passes through in FY22, the government may end the fiscal with a large cash balance of Rs 3 trillion. This can come handy in supporting a large part of the fiscal deficit without taking recourse to market borrowings. We caution that any new taxes like wealth tax or others at this point could do more harm than benefit,” he added.