Underspending by key ministries may help govt achieve FY24 deficit target

Underspending by as many as 15 central government departments where expenditures are less than one-third of the budgeted amount during the initial eight months of the current financial year (FY24) may help the government achieve the fiscal deficit target of 5.9 per cent of gross domestic product for FY24, experts said.  

According to latest data released by the Controller General of Accounts (CGA), the 15 departments have cumulatively spent only 17.8 per cent of the Rs 1.45 trillion allocated in the Budget. These departments and ministries include micro, small and medium enterprises, petroleum, civil aviation, food processing, heavy industries, and electronics and information and technology. 

“While the tax revenue has been buoyant, there are certain weak spots like disinvestment. If revenue does not meet the target, the only way to check fiscal deficit is to control expenditure,” said Madan Sabnavis, chief economist, Bank of Baroda. 

According to the CGA data, various infrastructure ministries, such as road, transport highways, railways, defence, and shipping, have seen higher utilisation till November.

Sabnavis said it can be guessed that the government had advised the ministries to keep discretionary spending aside and give preference to capex, till a clearer picture of the fiscal deficit emerges in January. 

The Centre’s fiscal deficit for the first eight months of the current fiscal year accounted for 50.7 per cent of the full-year target of Rs 17.87 trillion, much lower than 58.9 per cent during the corresponding period of the previous year.  

“The savings incurred due to lower expenditure in the ministries would also help the government meet any unanticipated rise in expenditure for instance, increase in subsidies. They will be able to absorb these pressures,” said D K Srivastava, chief policy advisor at EY India. 

The lowest utilisation for the April-November period was by the petroleum and natural gas ministry, which spent 5 per cent of its allocated Rs 41,007 crore as against 26 per cent of the Budget Estimates (BE) in the corresponding period last year. The CGA has reported -18 per cent spending by the minority affairs ministry during the April-November period, implying past savings.

The development ministry of the northeast region, along with the cooperation ministry, had spent only 11 per cent of the BE till November. 

The civil aviation ministry, which too has spent less than one-third of BE at 30 per cent utilisation, fell short in its revenue expenditure with only 29 per cent of BE spent. The ministry has spent 84 per cent of its capital expenditure during the first eight months of FY24. 

The micro, small, and medium enterprises ministry, too, was able to spend only 18 per cent of its budgeted Rs 22,138 crore till November, owing largely to low revenue expenditure.