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FinMin asks govt depts not to rush last minute spending
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SME Times News Bureau | 30 Jan, 2020
In a bid to contain the fiscal
deficit in the face of a likely huge revenue receipt shortfall, Finance
Ministry has asked other ministries and departments not to rush
expenditure in the last quarter (Jan-March) of the current financial
year which it says will be treated as breach of financial propriety
while limiting to those expense for which payments have been made
earlier.
"According to Rule 62(3) of the General Financial Rules,
2017, rush of expenditures particularly in the closing months of
financial year shall be regarded as breach of financial propriety and
shall be avoided. Finance ministry had already sensitized all
administrative heads' rush of expenditure in the year must be strictly
avoided. As per extant guidelines, the last quarter expenditure must be
limited to actual procurement of goods and services and reimbursements
of expenditures already occurred," the Department of expenditure said in
a circular to all department secretaries and financial advisors.
There
are indications that government may cut spending by up to Rs 2 lakh
crore to curb rising fiscal deficit. It has spent about 65 per cent of
the total expenditure target of Rs 27.86 lakh crore till November but
reduced the pace of spending in October and November, as per government
data.
Finance Ministry faces one of the biggest tax shortfalls in
recent years which could be at least up to Rs 2.5 lakh crore from both
direct and indirect taxes. The lack of disinvestment revenues and the
outgo of Rs 1.45 lakh crore due to the corporate tax cut in August last
year has only added to the revenue-expenditure gap. Asia's third largest
economy, growing at its slowest pace of 4.5 per cent in over six years
because of lack of private investment, though could be hurt further due
to the likely cut in spending but has limited options. The government is
likely to keep the fiscal deficit under 3.8 per cent of gross domestic
product, sources said, while letting it slip from its earlier set target
of 3.3 per cent for the year.
It may be recalled that the
Budget division of the ministry last month had revised the limits of
expenditure in the last quarter from 33 to 25 per cent and in March from
15 to 10 per cent.
"Considering the fiscal position of the
government in the current financial year, it has been decided to cap the
expenditure in the last quarter/last month of the current financial
year," the Budget division said in a circular to the departments and
ministries asking them to observe the guidelines "strictly &
regulate the expenditure accordingly".
The revised limit also
meant that departments that had not so far substantially utilised their
funds will not be able to spend the full budget amount this fiscal due
to the restrictions.
The government is struggling to meet the
fiscal deficit target of 3.3 per cent of the GDP following muted growth
in tax revenues because of an economic slowdown.
India's growth
fell to a six-year low of 4.5 per cent in the July-September quarter.
Also, the recent reduction in corporate tax to help revive the economy
is likely to cost the government Rs 1.45 lakh crore. The government's
fiscal deficit for April-October period was 2.4 per cent more than the
full year estimate.
Ratings agencies such as Moody's Investor
Services, Standard and Poor's (S&P) Global Ratings, and Fitch
Ratings have already raised concerns about possible fiscal slippage in
deficit.
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