Cash crunch forces the government to cut the ministry's spending.
Crashing economy, lower revenue generation and less then expected tax collection will show its impact on the upcoming budget. The biggest loser is going to be the rural development ministry, which is likely to see a decline in central assistance for its welfare schemes. Rural development has been the top priority of the UPA-2. However, grim economic growth has forced finance minister P Chidambaram to cut the budget of the ministry.
It is said that the ministry of finance has conveyed to the ministry of rural development that the central assistance will come down by 0.8% in the upcoming budget. This is the first time in the past four years that the ministry of rural development’s allocation will be less than the previous year. “The increase in allocation for the rural development ministry is abysmally low this time. It is -0.8% according to the communication from the finance ministry,” said a government official. In the previous budget, the ministry of finance had allocated Rs73,175 crore to the ministry of rural development. With the current proposed allocation for the ministry, it is likely to be around Rs72,589.6 crore. In the previous budget, the government had allocated Rs 33,000 crore to Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) Scheme. Allocation to MNREGA has also been brought down even though the scheme has been a big hit in rural areas.
Earlier, DNA had reported that the ministry of finance had communicated to the Planning Commission that the government wants to increase the gross budgetary support (GBS) for the 2013-14 by only 5% as against a hike of 18% in 2012-13. A five per cent increase in the GBS would mean that the finance ministry will provide only Rs 26,051, crore additional for the centrally-sponsored schemes in the upcoming budget which will amount to a total of Rs 5,47,051 crore in 2013-14. In the mid-term economic review, the government had said that it wanted to contain the fiscal deficit at 5.3% of GDP.
According to Kelkar Committee report, the government should keep its fiscal deficit at 4.8% in 2013-14 and bring it down to 3% by 2016-17.
The government had set up a target of mopping up Rs30,000 crore through disinvestment in the public sector units. However, weak market sentiments have made sure that no amount has been raised till date. At the most the government will be able to generate around Rs 10,000 crore in next two months, that will be short of its target by miles. Against a target of Rs40,000 crore through the auction of 2G spectrum, the government has been able to mop up only Rs9,400 crore so far. On the side of direct taxes, the government had estimated an increase of 20% in its revenue over last year. However, the government has been able to generate only 13% increase on that front.
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