Even if plan proposals are cut by 15 per cent, the spend would be the lowest in three years.
In what could be the reflection of a strained financial scenario the next financial year too, the Planning Commission has directed all central ministries and departments to finalise their annual plan proposals for 2012-13 keeping in mind three possible scenarios — of 5 per cent, 10 per cent or 15 per cent increase in plan expenditure.
Even if the 15 per cent proposition is considered, it would be the lowest in three years.
Plan expenditure refers to the expenditure incurred by the Centre on programmes and projects recommended by the Planning Commission. Various flagship schemes like the Mahatma Gandhi National Rural Employment Guarantee Scheme, rural development schemes, irrigation and flood control schemes fall under this category.
The Commission said the estimate for increase in outlay should factor in the impact of inflation, and expenditure increase for all critical schemes and programmes should be provided even if the proposal relates to just 5 per cent rise in outlay over that in 2011-12.
The scenarios would also hold for expenditure proposals for the 12th Five-Year Plan that starts next year (2012-2017).
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Incidentally, in the best-case scenario of 15 per cent increase, it would be the lowest in the past three normal years. Even as the increase in plan expenditure was 10.22 per cent in 2009-10, it cannot be taken as a normal year since there was a high base effect of 2008-09, when the plan expenditure had risen exponentially on account of the government’s efforts to provide stimulus to the economy. In 2008-09, plan expenditure was up 34.2 per cent up year-on-year.
In the current financial year, the finance ministry had settled for a 17 per cent increase in plan expenditure, at Rs 441,547 crore, even as the Commission demanded a 20 per cent increase in expenditure.
Planning Commission officials said the estimates were based on the assumption that 2012-13 would be a difficult year, as global economic conditions might not improve to the level earlier expected. This, in turn, could also impact the domestic growth.
This financial year, the government’s finances so far have been awry. In the first eight months, fiscal deficit has already touched 85.6 per cent of the Budget target for the financial year. The finance ministry believes that fiscal deficit could be in the range of 5.5 per cent to 5.8 per cent of GDP against the Budget target of 4.6 per cent in 2011-12.
The finance ministry had projected a GDP growth rate of 9 per cent in the Budget for 2011-12, but it has now scaled it down to 7.25-7.75 per cent due to uncertain global economic conditions and a slowdown in domestic economy, induced by high interest rates. In the first half of this financial year, the economy grew by 7.3 per cent.
The Planning Commission’s 2012-13 expenditure estimates, though still at an initial stage, do indicate the hard times the government expects ahead, unless there is a dramatic turnaround.
The Commission has also called upon the central departments and ministries to send in their 12th Plan expenditure proposals by earmarking at least 10 per cent of the Gross Budgetary Support for the northeastern states and 2-3 per cent for e-governance and IT applications.
With regard to the 12th Plan, the departments and ministries have also been asked to adhere to the goals laid down in the approach paper cleared by the 56th National Development Council held in October.
“The central ministries and departments have been told to prepare the proposals for the 12th Plan with a view to utilising the available resources in the most judicious manner and to ensure that planned expenditure is matched by physical achievements,” officials said.