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Most government departments, barring the ones directly handling the impact of the coronavirus pandemic, are staring at restricted budget allocations for the current fiscal year, despite finance minister Nirmala Sitharaman on Friday saying less government spending may drag economic recovery.

Speaking at the 18th edition of the Hindustan Times Leadership Summit on Friday, Sitharaman said: “I have to be conscious that if I don’t spend now, then the stimulus is meaningless. If I don’t spend now, the revival will get deferred and we cannot afford that."

However, a senior government official speaking under condition of anonymity said most government departments have been asked to cut down their expenditures this fiscal.

“There is significant expenditure switching happening among government departments," the official added on condition of anonymity.

Out of 55 ministries and expenditure heads, only 12 saw their spending cross last year’s level as a percentage of their budget allocation during the first seven months of FY21 till end October, while 43 ministries saw their expenditure dip when compared to last year’s level, according to data released by the Controller General of Accounts.

Among major ministries that saw their expenditure rise include the ministries of agriculture and family welfare (51%), AYUSH (55%), chemicals and fertilisers (85%), civil aviation (64%), consumer affairs, food and public distribution (103%), food processing industries (43%) and rural development (111%).

Those which may face drastic pruning of their expenditure this fiscal with substantially lower spending till October include the ministries of commerce and industry (33%), culture (34%), development of north eastern region (35%), electronics and information technology (34%), fisheries, animal husbandry and dairying (37%), housing and urban affairs (39%), education (36%), jal shakti (38%), law and justice (37%), micro, small and medium enterprises (27%), power (32%), science and technology (36%), skill development and entrepreneurship (37%), social justice and empowerment (33%), statistics and programme implementation (10%), tribal affairs (35%) and women and child development (36%).

In the September quarter, the gross domestic product (GDP) contraction came at a negative 7.5%, improving from a historic low of negative 23.9% in June quarter, mostly because of surprise resilience exhibited by the industry sector even though government final consumption expenditure (GFCE) contracted 22.2% in September quarter from 16.4% growth in June quarter, proving a drag on the economic recovery process.

However, the finance ministry defended its decision to cut spending in the September quarter, arguing that it was aimed at fiscal consolidation amid falling revenues.

“Government spending contracted by 22.2% in Q2 compared to 16.4% in Q1, reflecting the effort to consolidate the fiscal situation given the fall in revenue. The enhanced government spending in Q1 was imperative at that time, given the uncertainty of the lockdown and has supported the recovery in various segments in Q2," the ministry said in its latest Monthly Economic Review.

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