New Delhi: Consistent with its plans for a big boost in public spending, the finance ministry has suggested a 19% increase for fiscal 2009-10 in the so-called gross budgetary support, or GBS—the money it allocates to various government programmes through the Union budget.
The ministry has proposed the allocation of Rs2.85 trillion towards GBS, up from Rs2.4 trillion in the fiscal year ending March, as economic growth slows in the face of a global recession.
“The finance ministry has given its numbers, now it is for the Prime Minister to take a call,” said a senior government official close to the development but who did not want to be identified. He also said the numbers may change in case there is a vote on account and not a full-fledged Budget next month ahead of general elections due to take place by May.
A vote on account in Parliament enables the government to obtain funding to meet its expenditure for a part of the year.
The government, however, seems to favour presenting an interim budget that may allow it to announce some populist measures ahead of the parliamentary elections. Mint had reported on 17 January that the government is considering presenting an interim budget instead of the customary vote on account in the Parliament session that begins on 12 February.
Some economists say the suggested 19% increase in GBS is no more than a pre-election gimmick.
“A 19% increase against last year sounds good but doesn’t mean much as this government will not get to spend this money. Actual spending will start only by August-September, by when most likely the new government will have its own GBS through a new Budget, unless the United Progressive Alliance comes back to power,” said S.L. Rao, economist and chairman of the Bangalore-based think tank Institute for Social and Economic Change. “To me, as of now, this seems more an election gimmick and a way to fight recession,” added Rao.
A significant portion of GBS is spent on flagship government programmes such as the mid-day meal scheme, the Sarva Shiksha Abhiyan (an education programme), the National Rural Health Mission, the National Rural Employment Guarantee Scheme and the Jawaharlal Nehru National Urban Renewal Mission.
It also goes to fund parts of Bharat Nirman, a programme that seeks to reinforce rural infrastructure.
To bolster slowing economic growth, the government has been trying to increase its own spending. This month, it announced a second fiscal stimulus package of Rs20,000 crore. In addition, state governments have been allowed to borrow an additional Rs30,000 crore to fund measures to combat the economic slowdown.
In last year’s budget, the government’s focus was on reducing its revenue and fiscal deficits, economist N.R. Bhanumurthy noted, although increased spending and difficult economic conditions caused the deficits to widen more than estimated. The government is set to miss its deficit reduction targets under the Fiscal Responsibility and Budget Management, or FRBM, Act this fiscal.
“This year, even though the revenues are going to fall drastically, the government will relax the FRBM restrictions and increase GBS significantly, irrespective of the deficits,” said Bhanumurthy, associate professor at the New Delhi-based Institute of Economic Growth.
GBS grew by 11% in 2008-09 against the previous year. The Planning Commission and various ministries have been seeking a higher GBS.
Their demands are in line with the 11th Plan, which focuses on rural development, education, agriculture, irrigation and health. It is estimated the government will spend 75% of its total expenditure on these sectors compared with 55% in the 10th Plan.
Asit Ranjan Mishra contributed to this story.