NEW DELHI: After better than expected tax revenue and with signs of improving economy, the government has decided to loosen its purse strings and remove the expenditure curb on various ministries and departments with immediate effect, which it had placed due to Covid.
On June 30, the ministry had issued guidelines for putting curbs on 82 out of 101 demands for grants related to various central ministries and departments for a three-month period starting July 1. Barring some key sectors including health, agriculture, fertilisers, pharmaceuticals and food, it had asked the rest to restrict expenses up to 20% of their annual budgetary allocation in the September quarter. This was done as part of austerity measures amid the pandemic.
According to an office memorandum issued by the Economic Affairs Department of the Finance Ministry on Friday, the circular now stands withdrawn with immediate effect. “Accordingly, all ministries/departments are now permitted to spend as per their own approved monthly expenditure plan/quarterly expenditure plan, during the remaining part of the financial year,” the memorandum said.
It said the instructions related to regulating bulk item of expenditure (equal to or more than Rs 200 crore) are relaxed for those pertaining to budgeted capital expenditure for the remaining part of this fiscal.
The move comes almost a week after Prime Minister Narendra Modi met secretaries on September 18 and asked them to speed-up capital expenditure and ensure that government schemes are implemented to their full extent.
“We are now at a comfortable state. The PMO had already asked to relax the austerity drive. Going forward, we will be fiscally at a comfortable position than what we had thought,” a senior finance ministry official added.
According to data for the April-July period, the total government expenditure was just 29% of the Budget estimate. This move will boost expenditure and will further spur demand, ahead of the festive seasons.
Officials say that better net tax collection also helped in relaxing the curbs.
“The figures of direct tax collections for the Financial Year 2021-22, as on 22.09.2021 show that net collections are at Rs 5,70,568 crore, compared to Rs 3,27,174 crore in the corresponding period of the preceding Financial Year i.e FY 2020-21, representing an increase of 74.4%,” finance ministry said in a statement on Friday. The net collection is up by 27% over FY 2019-20, pre Covid period.