Fresh demand: FM seeks House nod for extra spending of Rs 6.3 lakh crore

Finance minister Nirmala Sitharaman on Thursday sought Parliamentary approval for an additional spending of Rs 6,28,380 crore in FY21, thanks to the government’s roll-out of various stimulus measures to soften the Covid-19 blow despite a plunge in its revenue mop-up.

This is the second batch of supplementary demands for the current fiscal, involving a net cash outgo of Rs 4,12,653 crore; the rest will be met through savings or enhanced receipts of various ministries and departments. The demands include a total of 79 grants and two appropriations.

The biggest chunk of the additional expenditure —Rs 3,04,558 crore — is meant for the ministry of food and consumer affairs. Of this, as much as Rs 2,50,209 crore is on account of extra food subsidy to be paid to Food Corporation of India (FCI) under the National Food Security Act and for free grain allocation in the aftermath of the pandemic, and the repayment of NSSF loans to FCI.

The supplementary demands also include Rs 65,412 crore for the department of fertilisers, primarily to clear fertiliser subsidies, and Rs 20,467 crore for the capital expenditure of the ministry of defence. Similarly, extra spending of Rs 1,22,208 crore is for providing loans to state governments via a special window under back-to-back loans to them in lieu of the GST compensation shortfall and under special assistance (as loan) to them for capital expenditure.

The first batch of such demands (with gross expenditure of Rs 2,35,853 crore) was placed before Parliament in September 2020 before the government rolled out mainly demand-side stimulus measures.

The government is seeking approval for additional spending, as it was forced to offer relief packages in the wake of the pandemic despite a plunge in revenue collections. Consequently, its fiscal deficit is expected to shoot up to as high as 9.5% of GDP, according to the revised estimate for FY21.

To fund the deficit, the Centre was also forced to raise twice its gross market borrowing to a total of Rs 12.8 lakh crore in FY21, up sharply from the budgeted Rs 7.8 lakh crore.

According to the revised estimate of FY21, total expenditure will rise to Rs 34.5 lakh crore, against the budgeted Rs 30.4 lakh crore. Revenue receipts, meanwhile, is estimated to slip to just Rs 15.6 lakh crore in FY21 from the budgeted Rs 20.2 lakh crore.

Even though the nominal GDP is expected to reverse a contraction and expand at 14.4% in FY22, the indispensability of continued spending to spur growth has forced the Centre to keep the deficit target elevated at 6.8% for the next fiscal as well.