New Delhi: The Planning Commission, the country’s apex planning body, is gradually reconciling to the fact that there would be no large gains in the gross budgetary support (GBS) in budget 2010-11, as the government struggles to reduce fiscal deficit.
GBS is the money the Union government allocates to various government programmes through the Union budget.
“The major objective of the finance ministry is to bring down the fiscal deficit from 6.8% of the GDP (gross domestic product) in the budget 2009-10. Therefore, we don’t expect to get a good rise in GBS against last year,” said Abhijit Sen, a member of the Planning Commission.
Although Sen did not spell out a number or percentage increase over last year, he admitted the Planning Commission revised the numbers down from what it had initially sought.
The commission had sought a much higher GBS for 2010-11 because some ongoing social welfare programmes, such as those focused on the right to education and housing for the urban poor, required more funds. In addition, new programmes such as the one aimed at food security—which are expected to be introduced in the next fiscal—will require more funds.
The finance ministry said in the July budget that in 2010-11 the Union government’s fiscal deficit would be reduced from 6.8% of GDP, the 2009-10 budget estimate to 5.5% of GDP.
Finance minister Pranab Mukherjee has repeatedly said the government’s aim is to return to the path of fiscal consolidation at the earliest. In the February 2008 budget, then finance minister P. Chidambaram announced that the government would set aside its commitments under the Fiscal Responsibility and Budget Management Act to meet social sector obligations. Sen confirmed that the finance ministry wants to return to fiscal consolidation. He also added that three departments—rural development, railways and urban development— had already absorbed most of what had been earmarked for them in the 11th Plan (2007-12) through GBS and should not expect much in the 2010-11 budget.
While rural development includes programmes such as the National Rural Employment Guarantee Scheme (NREGS), Pradhan Mantri Gram Sadak Yojana (rural roads scheme) and the Indira Awaas Yojana (housing scheme), the urban development ministry runs programmes such as the Jawaharlal Nehru National Urban Renewal Mission. Allocations in the three rural development flagship programmes alone were Rs40,000 crore, Rs12,000 crore Rs8,800 crore, respectively, in 2009-10.
In the current fiscal, the finance ministry has also kept tight control over expenditure. In December, it tabled a supplementary demand for grants in Parliament to meet expenditure that came up after the budget estimates were presented in July. This involved a “net cash outgo” of Rs25,725.22 crore. “If the government wants growth there might be fresh rounds of stimulus packages and if development is the objective, flagship programmes will be given priority,” said N.R. Bhanumurthy, a professor at the Delhi-based National Institute of Public Finance and Policy.
“I feel it will be a mix. Programmes such as Sarva Shiksha Abhiyan (education for all programme) and NREGS will be given a thrust whereas some other old or new programmes may be relegated to the back seat,” he added. “Similarly, in growth, tax boost to the export sector and other incentives may go. Actually it should be a mix in order to get fiscal consolidation without compromising on some good programmes.”
Sanjiv Shankaran contributed to this story.