FM Sitharaman seeks Parliament’s approval for ₹2.36 tn covid-related expenditure

The first batch of supplementary demands for grants for the current financial year will involve additional budgetary burden of ₹1.67 trillion while around ₹69,000 crore will be met through savings by various departments

Finance minister Nirmala Sitharaman on Monday sought Parliament’s approval for additional spending of ₹2.36 trillion in FY21 to meet the mounting expenses due to the coronavirus pandemic.

The first batch of supplementary demands for grants for the current financial year will involve additional budgetary burden of ₹1.67 trillion while around ₹69,000 crore will be met through savings by various departments. Most of the additional expenditure is for revenue expenses with only ₹5,462 crore earmarked for capital expenditure including ₹3,184 crore for crude oil reserves by the Indian Strategic Petroleum Reserves Ltd.

The government has already signalled fiscal slippage by sharply increasing its gross borrowing programme by ₹4.2 trillion in May to a total of ₹12 trillion for FY21. The additional spending sough from Parliament will mostly cover the programmes announced by the government under the Garib Kalyan Yojana and Aatmanirbhar package.

While the ministry of consumer affairs, food and public distribution will get ₹16,000 crore for meeting expenses towards the price stabilization fund and food subsidy, ₹46,602 crore will be transferred to states under post-devolution revenue deficit grant as recommended by the 15th Finance Commission.

The ministry of health and family welfare, which is at the forefront of the fight against the coronavirus pandemic, will receive additional funding of ₹14,232 crore for various covid 19-related expenses. Under the Garib Kalyan Yojana announced in March, the ministry of labour and employment will receive ₹4,860 crore, while the ministry of rural development will get ₹33,771 crore for direct benefit transfers to vulnerable sections of the society under the Aatmanirbhar package and ₹40,000 crore for rural job guarantee scheme.

The large additional net cash outgo of ₹1.67 trillion in the first supplementary demand for grants is partly comprised of new items announced under the fiscal support plan, stepped up health expenditure, as well as some items that were under-budgeted earlier, such as the revenue deficit grants in relation to the Fifteenth Finance Commission’s recommendations, said Aditi Nayar, principal economist at ICRA Ratings. “The extent to which savings can be found vide the expenditure management measures that were put in place, will contribute to determining the eventual fiscal outcome for FY21 in light of the ongoing revenue shock of around ₹6 trillion. Our baseline expectation is now that the government of India’s fiscal deficit will widen to at least ₹14 trillion, or 7.4% of GDP, in FY21," she added.