NEW DELHI: With revenue collections at a record low and rising pandemic-related liabilities, the Centre is asking its ministries to cut down on non-essential expenditure and adopt austerity measures. According to sources, it is also likely to further reduce spending on subsidies, including in the food sector.
“This is not a normal year. The government will continue with the essential expenditure, but somewhere it has to cut corners. So, do not expect subsidies to be the same level as last year. Ministries are asked to cut on all non-essential expenditure like events, entertainment, travel and will keep on giving advisory from time to time,” a senior official from the Finance Ministry told this publication.
The government is also unlikely to continue social welfare schemes beyond the given deadline due to tight budgetary conditions. India’s GDP growth has contracted by 23.9 per cent in the April to June quarter and the government exceeded its fiscal deficit target in just the first four months of this fiscal.
Due to Covid-19, the government is also unlikely to meet its divestment target, which will reduce its budgeted income significantly. The breaching of the fiscal deficit target also comes despite the Centre already having announced cuts in regular expenditure.
It was also slow on subsidy payouts and had postponed much of non-essential expenditure to the next fiscal year. Despite the subsidised food distributed during the lockdown and for Covid-related relief, food subsidy paid by the Centre for the April to June quarter was 49 per cent of budget estimates, much lower than the 59 per cent recorded during the corresponding period of the previous fiscal.
Similarly, petroleum subsidies came down to 40 per cent against 76 per cent. Going forward, officials have hinted that there would be more cuts to subsidies. Earlier this year, the Union Cabinet had approved a 30 per cent reduction in the salary and allowances of members of parliament for one year to fight against Covid-19.