Union Budget 2020: Finance Min directs govt departments to slowdown last minute spending

At a time when the economy is at the lowest, ahead of the Union Budget, the Finance Ministry has directed all the government departments not to rush the last minute spending for the current financial year. According to the ministry, if they do so, it will be a breach of financial propriety.

The Department of expenditure said in a circular, "According to Rule 62(3) of the General Financial Rules, 2017, the rush of expenditures particularly in the closing months of the financial year shall be regarded as a breach of financial propriety and shall be avoided. Finance ministry had already sensitized all administrative heads' rush of expenditure in the year must be strictly avoided. As per extant guidelines, the last quarter expenditure must be limited to actual procurement of goods and services and reimbursements of expenditures already occurred." 

The Budget circular further added, "Considering the fiscal position of the government in the current financial year, it has been decided to cap the expenditure in the last quarter/last month of the current financial year." 

The Fiscal Data

According to government sources, the Finance Ministry had provided a total expenditure target of Rs 27.86 lakh crore. The government has already spent 65 per cent of the total expenditure till November this year. However, the spending reduced a slowdown since October. As per sources, the government will be cutting down the spending by at least Rs 2 lakh crore in order to slow down the rising fiscal deficit. Further, as per reports, even though the earlier target to keep the fiscal deficit was around 3.3 per cent, the government is now likely to keep it under 3.8 per cent of the Gross Domestic Product (GDP). 

Read: Budget 2020: Could tax reliefs be in the offing? Here's what the market is saying

What is the fiscal deficit?

A fiscal deficit can be defined as a shortfall of the government's income compared to its spending. It is the difference between the total revenue and the total expenditure of the government. A fiscal deficit is usually calculated as the per cent of the total Gross Domestic Product (GDP). 

Read: Union Budget 2020: Key expectations from govt amid economic downturn

Centre's GDP estimate for 2019-20  

According to the first advance estimates released by the Centre on January 7, India's real GDP (Gross Domestic Product) growth during the financial year 2019-2020 is expected at 5% as compared to last year's 6.8%. This estimate is in line with the Reserve Bank of India's (RBI) own revised estimate in December. The economy grew by 4.5%, the lowest in six years, in the second quarter (July-September) of this fiscal in weakening from the previous quarter's 4.8 per cent.

Read: '7.5% & 3.5%' to '3.5% & 7.5%': Rahul Gandhi writes off Budget 2020, says govt has no idea

Budget 2020

The 2020 Union Budget, which will be presented by Finance Minister Nirmala Sitharaman on February 1, is being pegged as one that will have to serve dual purposes of driving industry investment, and also increasing consumption. 

Read: Budget 2020 the toughest yet for Modi government? Here are its top challenges