Government Cuts Expenditure Limit For March Quarter On Revenue Concerns
The North Block of the Central Secretariat building, which houses the Ministries of Finance and Home Affairs, stands in New Delhi, India. (Photographer: Prashanth Vishwanathan/Bloomberg)

Government Cuts Expenditure Limit For March Quarter On Revenue Concerns

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Faced with a shortfall in revenue collection, the government has initiated austerity measures by revising downwards the expenditure limit for the January-March period of the ongoing financial year.

The government has asked all departments to restrict the expenses to 25 percent of the Budget Estimate in January-March. "Considering the fiscal position of the government in the current financial year, it has been decided to cap the expenditure in the last quarter and last month of the current financial year," an office memorandum issued recently by Budget division of the finance ministry said.

Expenditure in the March quarter is to be restricted to 25 percent of the budgeted estimate as against an earlier limit of 33 percent, while expenditure in the last month should not exceed 10 percent as compared to a 15 percent limit earlier, it said. During the first two months of the quarter, the expenditure should not exceed 15 percent from the existing criteria of 18 percent of the budgeted estimate, it said.

"In case of any expenditure through re-allocation of savings within the Grant requiring prior approval of Parliament, expenditure may be incurred only after obtaining the approval of Parliament through Supplementary Demands for Grants," it said.

Any additional expenditure may be incurred after having obtained the approval of Parliament, it added. "Ministries and Departments are requested to observe the above guidelines strictly and regulate the expenditure accordingly in the current financial year," it said.

However, it has been clarified that items of large expenditure would continue to be governed by the guidelines issued previously. The last revision in expenditure guidelines took place in 2017 when it was decided to restrict the expenditure to 33 percent and 15 percent in the last quarter and last month, respectively of the financial year.

The latest revision in expenditure cut comes at a time when there is pressure on meeting the fiscal deficit target of 3.3 percent for the current fiscal. The country's fiscal deficit hit 102.4 percent of 2019-20 Budget Estimate at Rs 7.2 lakh crore at the end of October.

Also read: India’s Fiscal Deficit In November At 114.8% Of 2019-20 Target

There is widespread speculation that fiscal deficit target may be relaxed because of the lower-than-estimated tax collection and the subdued non-tax mop-up, especially disinvestment. Gross direct tax collection increased by 5 percent until November. The finance ministry has a 15 percent growth in direct tax collection at Rs 13.80 lakh crore for the current fiscal.

With regard to indirect tax, Goods and Services Tax remains a matter of concern for various reasons. The Central GST collection fell short of the Budget Estimate by nearly 40 percent during April-November 2019-20, according to government data. The actual CGST collection during April-November stood at Rs 3,28,365 crore, while the Budget Estimate is of Rs 5,26,000 crore for these months.

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