FinMin plans to release unspent money, boost demand amid economic slowdown

Finance Minister Nirmala Sitharaman
The finance ministry is working out a mechanism to release the money, stuck after it sanctioned the amount to other ministries and departments for various projects and schemes, to prop up the sagging economy.

Besides, the finance ministry has asked the agriculture ministry to expedite money disbursement under the PM Kisan to increase disposable income to distressed farmers to boost demand.

The ministry is also planning to look at the fiscal deficit of entire country — the Centre and the states — before it holds pre-Budget consultations. Besides, it will try to cut off-Budget expenditures which were flagged by the Comptroller and Auditor General (CAG).

The ministry is likely to come up with another intervention shortly to revive economic growth, which plummeted to over a six-year low of 5 per cent in the first quarter of 2019-20. The next round of announcement might cover micro, small and medium enterprises, textiles, the financial sector, and  markets.

Sources said Finance Minister Nirmala Sitharaman was holding daily meetings with secretaries of her ministries, including corporate affairs, to gauge areas of concern in the economy.

Sources said the amount of sanctioned-but-unspent-funds is likely to be less than estimation of some experts at 1.5 per cent of the country’s gross domestic product (GDP).

The finance ministry is working with other ministries and departments to exactly pinpoint the areas where these funds are stuck.

The government has budgeted its capital expenditure to grow by 6.9 per cent at Rs 3.4 trillion in 2019-20. Till August, the government has spent Rs 1.07 trillion, constituting 31.8 per cent of the Budget Estimates. This is lower than capex at 37.1 per cent of BE at this point of time last year.

Sources said the government was taking all measures to meet the Budget target of capex.

PM-Kisan

Concerned at the lack of disbursal of money under PM Kisan, the finance ministry has asked the agriculture ministry to speed up the work.

The PM-Kisan scheme was announced in the Interim Budget, under which the government decided to provide Rs 6,000 per year (in three equal installments) to an estimated 125 million small and marginal farmers holding land up to 2 hectares. Later, the scheme was expanded to all 145 million farmers, irrespective of the size of their landholding.

A sum of Rs 21,600 crore has been paid to farmers’ families so far under PM-kisan, of which Rs 15,600 crore has been paid in the 2019-20 financial year alone. Before the start of the 2019-20 financial year, a sum of Rs 6,000 was paid to over 30 million farmers.

In 2018-19, the Centre allocated Rs 20,000 crore for the scheme, while for the 2019-20 financial year a full sum of Rs 75,000 crore has been allocated.

Though there are around 145 million beneficiaries, based on the 2015-16 agriculture census, so far by all indications, sources said the number might not exceed 100 million, based on land holding records submitted.

This, officials admit, could be due to inadequate land records, multiple titles, improper mutation and also reluctance on part of some to declare their holdings.

The rural distress could be gauged from the fact that tractor sales in August plunged by 16.5 per cent, the worst ever decline in the past eight months of the current calendar year.

The sales stood at 37,050 units against 44,390 in the same month last year, according to figures released by Tractors and Mechanization Association (TMA). Also, dispatch of harvestors and thrashers to dealers declined by 69.8 per cent in July, according to the latest figures of the Index of Industrial Production (IIP).

Fiscal deficit

Sources said the finance ministry will look at fiscal deficit figures of the entire country and not just the Centre, while starting the pre-Budget consultations.

Also, the ministry will try to reduce off-Budget borrowings. 

In a presentation to the 15th Finance Commission (FFC) in July, CAG had re-calculated the Centre’s fiscal deficit of 2017-18 to show that it actually works out to 5.85 per cent against 3.46 per cent shown by the government. According to CAG estimates, off-budget borrowings for revenue expenditure stood at 0.96 per cent of the GDP, while capex was pegged at 1.43 per cent that year.

NHAI payment

As payments by the National Highways Authority of India (NHAI) has dried up, the finance ministry believes that the fist InvIT by the Authority is likely to see huge response from investors that would help solve the problem.

The NHAI’s InvIT's exercise was underway when the Prime Minister’s Office asked the NHAI to monetise existing road assets through TOT or an InvIT, because the PMO felt that the authority was “totally log jammed” by an unplanned and excessive expansion of roads.

Around Rs 60,000 crore of payments were pending with public sector enterprises, including the National Highways Authority of India (NHAI) till early this month. Expenditure Secretary GC Murmu had chaired a meeting on September 6 with head of CPSEs asking them to quickly overdue payment to vendors, especially MSMEs.



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