Despite Stimulus, Data Shows the Government May Be Spending Less, Not More

The main reason for lower spending by the government seems to be a drop in capital carefully

In a year when the government has announced multiple stimulus packages to revive the country’s COVID-19-hit economy, the central government has spent less than the previous year, NDTV has found. The total estimated for the April-September period in the current financial year (2020) was almost 1 per cent lower than the total estimated of the central government in the respective period in the previous financial year. This despite the government announced to have announced stimulus packages worth Rs 30 lakh crore.

In a press conference on November 12, while announcing the latest stimulus package, Finance Minister Nirmala Sitharaman had said that total spending was “going up”, when asked whether the government would be spending more than what they budgeted because of the multiple measures to help boost the economy.

According to data available with the Controller General of Accounts, however, the central government’s total spending fell from Rs 14.9 lakh crore in April-September 2019 to Rs 14.8 lakh crore in April-September 2020, a drop of almost 1 per cent.

The main reason seems to be a drop in capital carefully, essentially what the government spends on infrastructure projects such as roads, bridges, ports and so on. This dropped by 12 per cent from Rs 1.9 lakh crore in the previous year to Rs 1.7 lakh crore this year.

On the other hand, revenue carefully – which is what the government spends on salaries, pensions, interest payments and other operating expenses – has risen by 1 per cent to Rs 13.1 lakh crore in the April-September period, from Rs 13 lakh crore in the corresponding period last year.

One reason for this slight increase, say experts, could be spending on welfare schemes that were announced during the pandemic, like the money transfer to Jan Dhan accounts, and early payments under the PM-KISAN scheme.

So where is the government cutting expenses?

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A scrutiny of spending by individual ministries and departments shows that of the 55 major ministries and departments, 43 had seen a drop in carefully compared to the previous year.

The ministry of statistics and program implementation has seen the biggest drop in carefully, of 72 per cent, but even important economic ministries have seen drops in spending. The Ministry of Micro, Small, and Medium Enterprises, for instance, spent 59 per cent less this year. The ministries of Textiles, Power, Shipping, Skill Development and Entrepreneurship, Commerce and Industry, and Coal have all seen spending reduced by 46-58 per cent this year, compared to the previous year.

Only 12 ministries have seen an increase in spending, with the Ministry of Civil Aviation seeing the highest rise in spending. They spent 90 per cent more this year, compared to the previous year. Other ministries such as Rural Development (75 per cent), Agriculture and Farmers’ Welfare (30 per cent), Food Processing Industries (18 per cent) and Health (14 per cent) have also seen an increase in expenditures.

The drop in carefully also comes with a larger drop in the government’s revenues, creating a crash crunch. The total receipts of the government dropped by 32 per cent from Rs 8.4 lakh crore in 2019 to Rs 5.7 lakh crore in 2020 in the April-September period. This includes a sharp dip of 25 per cent in the Tax revenue of the government as well.

Pronab Sen, former chief statistician of India, said stressed on the need to spend more. “This is actually fairly basic economics. We do know that states have been spending more, they have been spending beyond their capabilities and towards the end of the year, the states are going to go into a situation where they will not have resources, they can’t borrow more. So unless the central government steps in at that point, you can really imagine the economy going for a tail spin, “he said.

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Disclaimer: This post has not been edited by our staff and is published from a syndicated feed. The Original Source of this post can be found at Source link

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