India Retains Spending Curbs On Government Departments For Third Straight Quarter

India has retained expenditure restrictions for government departments for the third consecutive quarter amid stressed finances following the pandemic.

The restrictions have been imposed “with a view to manage cash flows of the government,” according to an office memorandum by the Finance Ministry. This comes as the government focuses spending on activities with high multiplier effect on the economy, and has asked departments not to initiate any new public-funded schemes in the ongoing fiscal besides those announced in Atmanirbhar Bharat financial package.

For October-December, spending for Department of Fertilisers, and capital outlay on defence services and defence services (revenue) have been moved to Category A, which includes departments without any spending curbs, according to the memo. These were earlier in Category B, where spending was restricted to 20% of the budgeted expenditure in a quarter.

In April-July, the total government expenditure was Rs 10.54 lakh crore, or 35% of the total budgeted target for the ongoing fiscal, according to government data. The government faces a tough task to step up spending to lift the economy that saw a 23.9% contraction in April-June at a time when its tax revenues dwindled. However, the central government will increase its spending, if needed, Expenditure Secretary TV Somanathan had earlier told BloombergQuint.

Government departments have also been advised not to bunch up their spending to improve the pace of expenditure which may lead to parking of funds, the memorandum said.

“In this time of acute cash stress, utmost care may be taken to avoid releases that can contribute to idle parking of funds,” the memo said.