India Curbs Ministries’ Spending as Fiscal Concerns Mount

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India has cut the spending limits for some of its ministries and departments as the second wave of coronavirus infections strains the country's finances.

“Keeping in view the evolving situation arising out of Covid-19 and anticipated cash position of the government, it is felt essential to regulate” the expenditure plan for the quarter starting July 1, the finance ministry said in an office memorandum Wednesday.

During these three months, overall expenditure of more than 100 departments, including steel, labor and civil aviation, will be restricted to 20% of the budget estimate for the current financial year. Some exceptions may be permitted, with priority given to increase in capital expenditure, it said.

In the two months to May, the government spent only 13.7% of its budgeted expenditure for the year, compared with 16.8% in the year-ago period, data released by the Controller General of Accounts showed Wednesday.

The move to restrict spending comes as the Covid-19 pandemic has set India on track to miss its budget deficit target for a fifth straight year. Increased spending on relief measures, coupled with weak revenues could widen the deficit by as much as one percentage point, according to economists.

Read: India Posts Record Fiscal Gap Amid Spending to Cushion Economy

Finance Minister Nirmala Sitharaman on Tuesday asked some ministries to front-load their capital expenditure as part of revitalizing the pandemic-hit economy. She also directed the petroleum and oil ministry to speed up asset sales.