Restrict expenses to 20 per cent of budget allotment in Sept quarter: Centre to Ministries

As part of austerity measures amidst the pandemic, the Central government on Wednesday instructed ministries and departments to restrict their expenses to a maximum of 20 per cent of their annual budget allotment in the September quarter. However, this would not be applicable for select ministries and departments, including health, agriculture, fertilisers, pharmaceuticals, food, ministries of housing and urban affairs, drinking water, railways, road transport, MSME and rural development.

As per an office memorandum issued by the Department of Economic Affairs under the Ministry of Finance, all other ministries and departments "will require to restrict overall expenditure within 20 per cent of BE 2021-22 in Quarter 2 (July to September 2021)." Furthermore, these curbs would not be applicable for activities like pension payments, interest payments and transfer of funds to states.

Keeping in mind "the evolving situation arising out of COVID-19 and anticipated cash position of the government, it is felt essential to regulate quarterly expenditure plan / monthly expenditure plan of specific ministries and departments in quarter 2," the memorandum said. The directions have been passed with the approval of the Expenditure Secretary who is also the Finance Secretary.

"Ministries or departments are advised to observe the guidelines strictly and regulate the expenditure accordingly in the current fiscal. Any deviation from these guidelines would require prior approval of the Ministry of Finance," it added. The memorandum added that priority will be given to applications of relaxation rising out of an increase in capital expenditure.

Finance Minister Nirmala Sitharaman on Tuesday told ministries to achieve more than their capital expenditure or Capex targets for this fiscal. She emphasized that increased spending would play a critical role in reviving the economy post-pandemic.

The capital outlay provided for by the union budget of 2021-22 is Rs 5.54 lakh crore, a 34.5 per cent increase from the Budget Estimate of 2020-21.

Meanwhile, India's total debt has risen by 6.36 per cent to Rs 116.21 lakh crore as of March 2021. Total liabilities have reached about 59 per cent of India's GDP as the government borrowed record amounts to fill the revenue shortfall. At the end of December 2020, the total liabilities of the government including those under the "Public Account" stood at Rs 109.26 lakh crore. As of March 2021, public debt accounted for 88.10 per cent of total outstanding liabilities.

Furthermore, nearly 29.33 per cent of the outstanding dated securities have a residual maturity of fewer than five years. In the fourth quarter of the last fiscal, the central government issued dated securities worth Rs 3,20,349 crore against Rs 76,000 crore a year ago. Repayments were at Rs 29,145 crores.