Govt Employs Austerity Measures To Meet Fiscal Deficit

Due to paucity of resources, the central government has ordered several ministries and departments to spend a maximum 25% of the expected budget of the entire year in the last quarter of 2019-20, and asked that this be followed strictly.

This means that those ministries and departments which have a lot of remaining funds, will not be able to use them completely. This clearly implies that the government wants to reduce expenditure in a bid to prevent fiscal deficit.

In light of the deepening economic crisis in the country, the central government has fixed the limit on expenditure by ministries and departments. It is important to note here that in the final quarter of last year, there was a concession to spend 33%.

In February 2019, Piyush Goyal presented the interim budget. When the Modi government came back to power, Finance Minister Nirmala Sitharaman presented the general budget. Compared to the interim budget, there have been cuts in the funds available for many projects in the general budget. 

There have been cuts of Rs 500 crore in the budget of north-eastern states, Rs 360 crore for police budget, Rs 251 crore for skill development and employment generation, Rs 200 crore for Green Energy Corridor and Rs 150 crore for Smart City Mission.

In the month of April 2019, the Prime Minister’s Office (PMO) had advised the National Highways Authority of India to shut down its road projects and sell its assets to private companies. The reasoning behind both these suggestions by the PMO was that road projects are not financially-tenable.

Overall, in terms of the economy, this year was like a nightmare and India lagged behind even Bangladesh and Nepal on the economic front.

In the normal course, government expenditure increases in the last quarter because it is essential to allocate funds for government schemes before the end of the financial year. This year, all these schemes will remain stuck due to the new limits on expenditure. 

The government has already crossed the limit of fiscal deficit in six months of the year and the coffers are empty due to less taxes being paid.