Govt May Cut over 7% or Rs 2 Trillion in Budgetary Allocations for 2019-20

New Delhi: The Central government is likely to cut spending for the current fiscal year by over Rs 2 trillion or 7% of total planned expenditure amid one of the biggest tax shortfalls in recent years, Reuters reported, citing government sources.

Meanwhile, another report suggests that the expenditure compressions are expected across ministries -- of agriculture, civil aviation, roadways, shipping, electronics, information technology, tourism and social sector, among others, that have underspent so far.

The massive cut down in budgetary allocations is being attributed to the anticipated revenue shortfall of Rs 2.5 trillion. Citing sources, Reuters reported that the government’s move is intended to keep the fiscal deficit under 3.8% of gross domestic product (GDP), against the earlier set budget target of 3.3% for the fiscal year.

Furthermore, in order to match the new fiscal deficit, according to the report, the government is likely to raise additional borrowing of Rs 300 billion to 500 billion in the current year.

It is to be noted that India’s economic growth slowed for six consecutive quarters to 4.5% in July-September, despite interest rates cut by the Reserve Bank of India and a surprise corporate tax cut by the Finance Ministry in 2019, among other stimulus by the government during the early signs of economic slowdown. However, the measures did not yield any increase in private investments.

According to government data, it has spent about 65% of the total expenditure target of Rs 27.86 trillion till November-end. The Controller General of Accounts data show that there has been underspending across ministries. For example, the Agriculture Ministry has spent 49% of its budgeted expenditure till November, compared with 70% for the same period last fiscal year.

Similarly, the Minority Affairs Ministry spent 29% of the total allocated expenditure from April to November, Civil Aviation Ministry spent 39%, Food Processing spent 43%, Roadways Ministry (63%), Shipping Ministry (53%) and Tourism (43%) of the allocated expenditure till November-end.

The government is likely to draw rationale from a December order of the department of economic affairs that stated that departments should spend just 25% of their yearly allocated amount in the January-March quarter against the earlier norm when departments were allowed to spend 33% of their allocated amount during the last quarter.