Expenditure Management measure

Subject: Economy

Context:

• Ministry of finance has disallowed the automatic carry forward of unspent money by various ministries and departments over the next month or quarter.
• It also decided that order restricting overall quarterly expenditure of certain ministries and departments to 15-20% of their budgeted amounts in the first quarter of this fiscal, will continue through the second quarter.

Concept:

• A decline in direct and goods and services tax collections further stressed the government’s revenue at a time the economy is headed toward its first full-year contraction in four decades.
• The government has reprioritised its spending in the current fiscal due to the Covid-19 outbreak with focus on minimising spending on things that have low multiplier effect on the economy, and cutting dependency on items with high import intensity
• The ministry, in April, had classified government departments into three categories and tightened their spending for the April-June period, barring for those fighting the outbreak.
• The ministries or departments under category ‘C’ such as petrochemicals, coal, commerce, telecommunications, among others, could spend only 15% of budget estimate for the current year, while those in category ‘B’ such as fertilizers, posts, defence services can spend only 20%.
• No curbs were placed for departments under category ‘A’ that include agriculture, ayurveda, pharmaceuticals, civil aviation, rural development, among others.
• These restrictions will now continue for the quarter ending September.