Centre plans to file for 'token' supplementary Budget

Last Updated: Thu, Aug 22, 2013 05:28 hrs

With Finance Minister P Chidambaram drawing a red line for the fiscal deficit at 4.8 per cent of gross domestic product (GDP) this year, the first batch of supplementary demands for grant is likely to be barely around Rs 1,200 crore.

The supplementary demand, expected to be tabled in Parliament next week, could include a provision of Rs 1,000 crore for setting up a women's bank.

"It will be a token supplementary of about Rs 1,200 crore. Only the most urgent demands are being entertained," a finance ministry official, who did not want to be identified, told Business Standard.

Officials said much of the demand would be met from savings under other heads, thus eliminating the need to provide for additional spend in cash. "The fiscal deficit target has to be met. (So) the net outgo in the first supplementary would be close to nil. We are not going to spend cash. It will be mainly through savings," said another official.

Officials agreed the government might have to provide additional money for fuel subsidy, but that would come only in the second supplementary in the winter session, after assessing the actual requirement of oil marketing companies, in the light of rupee depreciation and trend in crude price movement.

The finance ministry had made it clear to all other ministries that it would not entertain any proposal for cash supplementary, except in absolutely unavoidable cases or those relating to Budget announcements, and even in such cases it had asked them to identify matching savings with their departments.

The funds will be provided for the women's bank, as it is expected to start operations with branches in eight cities from November. In Budget 2013-14, the finance minister had announced setting up of Bharatiya Mahila Bank with an initial capital of Rs 1,000 crore.

The government has projected its expenditure at Rs 16.6 lakh crore this year - an increase of 16.4 per cent over the revised estimates of last year. The increase over Budget estimate was only 11.7 per cent.

Last year, too, the government had kept its supplementary demands at the bare minimum. In fact, the first batch of supplementary was tabled only in the winter session in December. A compression in expenditure (Plan expenditure was cut by Rs 92,000 crore) had helped the ministry bring down the fiscal deficit to 4.9 per cent of GDP, against the 5.1 per cent projected in the Budget.

Officials said unlike last year, fiscal deficit was not much of a problem this year and the current account deficit (CAD) was the bigger worry of the government. But conscious that CAD problem may get into fiscal deficit, the finance ministry was treading cautiously.

In a conference call with investors on Tuesday, Economic Affairs Secretary Arvind Mayaram said the government would be able to manage its fiscal deficit by cutting down expenditure whenever needed.

"India brought its fiscal deficit down more sharply and quickly than any other country, but managing the CAD is more complicated because the government has less control of it. We are determined not to allow the CAD to go beyond 3.7 per cent of GDP this year, and we may even surprise," he added.

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