Home >Economy >Govt seeks House nod for extra spending

The central government on Tuesday sought the Parliament’s approval for an additional expenditure of 23,675 crore for this financial year, in view of the increased spending on healthcare amid the pandemic.

Finance minister Nirmala Sitharaman also sought Parliament’s approval for transferring loans of around 1.59 trillion raised from the market as part of its commitment to compensate states for the revenue shortfall under the goods and services tax (GST).

This is part of a nearly 1.64 trillion technical supplementary grant that do not involve a net cash outgo, as it is financed either by savings, extra revenues or other arrangements.

GST compensation to states through loans raised by the central government will eventually be repaid from the cess levied in future on the sale of luxury and sin goods. The proposal was cleared by the GST Council in May, considering the expected revenue deficit in the cess collected from the sale of cars and tobacco this fiscal year. The debt financing of states’ GST revenue gap will be recognised as fiscal deficit in the states’ budgets, and not of the central government.

The objective of the supplementary grant is to allow states to have access to additional funds and create capacity in healthcare, primarily in the rural areas, said D.K. Srivastava, chief policy advisor, EY India. “The additional expenditures will have a stimulating effect on the economy, especially if the state governments promptly utilize the GST compensation receipts for raising their own expenditures, including those of the health sector," he added.

The spending proposals are part of the first supplementary grants for FY22 which was tabled in the House. In February, Sitharaman in her budget had allocated 34.8 trillion for FY22, to improve healthcare infrastructure, boost capital spending and domestic manufacturing, besides building infrastructure. Despite the government announcing a 6.28 trillion package in June, comprising loan guarantees, free foodgrain supply and incentives for job creation, over the next few years, the fiscal impact in FY22 from the stimulus measures is expected to be much lower.

Around 72% of the additional spending, involving net cash outgo of 23,675 crore projected in the first supplementary demand, which was tabled on Tuesday, goes to the healthcare sector. The rest will be used for loans to Air India, sugar mills, and to lenders for the compound interest support scheme for loan moratorium, showed the document tabled by Sitharaman.

Fresh funds were allocated under the rural health mission for covid emergency response and preparedness. The cabinet on 8 July had cleared the covid package in view of the possibility of a third wave of the pandemic. It was a continuation of a similar package offered during the first wave of the covid.

Aditi Nayar, chief economist at rating agency ICRA Ltd, said with healthy revenues amid a modest increase in expenditure outlay, the cash flow position of the central government does appear to be comfortable.

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