Covid-19 Impact: Government Imposes Spending Curbs On Some Ministries

The central government has put restrictions on spending by certain ministries and departments during the July to September quarter amid its anticipated cash position and the continuing Covid-19 crisis, the Department of Economic Affairs said in a circular today.

Ministries have been split into ‘Category A’ and ‘Category B’.

There are no restrictions on spending by ministries and departments belonging to Category A, including Ministry of Road Transport and Highways, Ministry of Railways, Department of Pharmaceuticals and Department of Food and Public Distribution among others.

Ministries and departments in Category B will have to restrict their spending to 20% of the budget estimate in the second quarter of the current financial year, the circular said.

Some of the major departments and ministries that fall in Category B are:

  • Ministry of Civil Aviation.

  • Ministry of Coal.

  • Ministry of Home Affairs.

  • Department of Commerce.

  • Department of Telecommunications.

  • Department of Consumer Affairs.

The circular said any relaxation on the restrictions, if granted, will be prioritised if the nature of such spending was arising on account of increase in capital expenditure.

Similar restrictions had been imposed last year but later eased.

The curbs on expenditure come just two days after Finance Minister Nirmala Sitharaman unveiled relief measures to fight the impact of the second wave of the pandemic on the economy.

The free food grain plan, which has been extended till Diwali, itself is estimated to cost the government Rs 93,868 crore.

So far, government finances have been stable with revenue considerably higher than a year ago.

In April-May, the government’s fiscal deficit stood at Rs 1.23 lakh crore, or 8.2% of the budget estimate. Last year, the fiscal deficit for the two months was at 59.6% of the budget estimate.

Higher tax and non-tax revenue, alongside slightly lower expenditure helped improve government finances.

Total expenditure for the first two months of the fiscal stood at Rs 4.77 lakh crore, or 13.7% of budget estimate. Last year, the government spent 16.8% of its budget expenditure in these two months.

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