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    Govt keeps tight leash on expenditure even as busy season starts from October; extends expenditure curbs to third quarter

    Govt keeps tight leash on expenditure even as busy season starts from October; extends expenditure curbs to third quarter

    Govt keeps tight leash on expenditure even as busy season starts from October; extends expenditure curbs to third quarter
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    By Sapna Das   IST (Published)

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    Keeping the tenuous revenue position in mind, the government has extended the expenditure curbs on ministries for the October-December quarter as well, even as the economy enters the busy season from October.

    Keeping the tenuous revenue position in mind, the government has extended the expenditure curbs on ministries for the October-December quarter as well, even as the economy enters the busy season from October.
    In fresh orders today, the government said, “With a view to manage cash flows, it has been decided to retain and continue with the same expenditure management measures, stipulated in Q1 and Q2, for Q3 - October 2020 to December 2020 of FY2020-21”.
    While GST numbers for September are yet to be reported, net direct tax collections for April-September so far are likely around Rs 3.33 lakh crore, up 72 percent over the August-end numbers of Rs 1.93 lakh crore but still a negative 28 percent compared to April-September 2019.
    As a result, the asking rate to meet the original budget target of approx Rs 13 lakh crore has widened to Rs 1.62 lakh crore of net collections a month.
    Similarly, disinvestment receipts are also around Rs 16,000 crore so far against the Rs 2.10 lakh crore target set for this fiscal.
    Given the H1 revenue trend and the severe growth contraction due to COVID-19, the government is likely to revise its revenue targets downwards in the revised estimates.
    The Expenditure circular says: “Amounts unspent in a month/quarter will not be automatically carried forward. Ministries/departments are to take utmost care not to bunch up expenditure/releases. In this time of acute cash stress, utmost care may be taken to avoid releases that contribute to idle parking of funds”.
    Except for the Ministry of Food, Finance, Rural Development, Agriculture and to an extent Health, spend by government ministries has slowed considerably due to the imposition of expenditure curbs from April this year.
    However, the departments of Fertilizer and Defence have been freed from the quarterly spend cap of 20 percent. Fertiliser subsidy payments are inelastic and are a commitment as prices are controlled. The defence ministry’s revenue expenditure like salaries and capex for modernisation could not be kept restricted for too long.
    But a number of other ministries like Housing & Urban Development, Department of Education, MSME, Labour, Drinking Water & Sanitation continue to be straitjacketed under the 15 percent quarterly expenditure cap.  In fact, in a month, these ministries cannot spend more than 5 percent of their budget.
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