Modi said the government will continue to take steps to empower the poor and the needy as well as to enhance economic activities with due precautions. (ANI Image)

Prime Minister Narendra Modi on Tuesday extended the three-month (April-June) free-grains scheme, unveiled in late March amid Covid-19 outbreak, for another five months till November-end, a move that will increase the total cost of the scheme to around Rs 1.4 lakh crore. With this, the additional budgetary cost of the Covid-19 stimulus package will rise from a little over Rs 2 lakh crore or around 1% of the gross domestic product (GDP) to close to Rs 3 lakh crore or 1.5% of GDP.

In a televised address to the nation, his fifth after the onset of the intractable pandemic, the prime minister cautioned people lowering their guard against the highly contagious virus when it has spread much wider than during the lockdown period from late March to early May. Modi said the government will continue to take steps to empower the poor and the needy as well as to enhance economic activities with due precautions.

The cost of the Pradhan Mantri Garib Kalyan Anna Yojana till June-end is estimated at Rs 51,000 crore (Rs 46,000 crore for free white/rice of 5 kg/month each to some 80 crore beneficiaries and another Rs 5,000 crore for free distribution of 1kg/month of chana). Another Rs 85,000-90,000 crore or so will be required for continuing the scheme till the end of November. Grains requirement for the extension of the scheme is 20 million tonne rice/wheat and 0.98 million tonne of chana.

After the revision of the Centre’s borrowing programme, its fiscal deficit for FY21 stands at 5.7% of GDP, against budgeted 3.5%; however, the big decline in revenue will likely take the deficit to around 7% of GDP, even without any expenditure compression from the budgeted level. Although with Tuesday’s announcement, the total non-budgeted expenditure committed so far has risen to nearly Rs 3 lakh crore, it is not clear at this stage whether the budgeted expenditure of Rs 30.4 lakh crore will actually be exceeded and by how much. This is because there is a conscious attempt by the government to curb certain budgeted expenditure as it is re-prioritising the spending heads.

Fiscal deficit for April-May this fiscal, according to data released on Tuesday by the Controller General of Accounts, was 58.6% of the full-year target, compared with 52% of the relevant target in the same period last year. Total expenditure during the first two months of the fiscal was 16.8% of the budget estimate for FY21, as against 18.4% of FY20 BE in the year-ago period, reflecting an effort to curb spending.

Announcing Unlock 2 guidelines on Monday with effect from July 1, the Centre allowed more domestic flights and passenger trains in a calibrated manner even as it said educational institutions, metro rail services, cinema halls and gyms will remain shut.

As the fight against coronavirus shifts to Unlock 2, the prime minister noted that with the commencement of the rainy season, a lot of work will take place in the agriculture sector. Also, several festivals will be celebrated during the period one after the other. “Keeping in mind that requirements as well as expenditure increase during this time, the government has decided to extend PMGKAY till Deepawali and Chhath Puja, ie, the scheme will continue to remain applicable from July till the end of November,” Modi said. With ‘one nation, one ration card’, he said migrant workers will benefit immensely from the scheme as they can withdraw their ration anywhere in the country.

He observed that due to timely decisions like lockdown, it has been possible to save the lives of lakhs of people, adding that the death rate in the country is amongst the lowest in the world. However, irresponsible and negligent behaviour has been on the rise during Unlock 1, he said expressing concern.

He reiterated the pledge to work towards Atmanirbhar Bharat and to be vocal for local, while also asking people to be careful, use mask/face cover and continue following the mantra of maintaining ‘do gaz doori’.

The Centre is leaving no stone unturned to rein in low-priority expenses. The expenditure department in the finance ministry has directed all ministries and departments to suspend spending on most new schemes, including self-approved ones for FY21 and not to initiate any fresh schemes for at least a year. The ministries are empowered to devise schemes with expenditure commitment of up to Rs 500 crore.

Already, the deficit in FY20 turned out to be 4.6% of GDP, versus budgeted (RE) 3.8%, as the Centre had faced a 9.4% shortfall in receipts from the revised estimate level, and still had to keep the spending at over 99% of the RE level.

The Centre has upped the gross borrowings for FY21 by 54% to Rs 12 lakh crore. Its budgeted fiscal deficit, inclusive of the fiscal stimulus and likely revenue shortfall, is seen to be about 7-8% of the GDP this fiscal by various analysts.

By asking some departments to restrict Q1 spending to 40% of the usual level, the Centre is looking to save nearly Rs 1.4 lakh crore, but this goal may not be fully met; another Rs 25,000 crore is being saved by freezing the dearness allowance (DA) increase of its employees for FY21.