The Union Budget for 2020-21 is falling apart under the impact of the blow dealt by the coronavirus pandemic, says former finance secretary of India Subhash Chandra Garg.
In a blog post dated April 14, Garg deconstructs the budgeted government expenditure for the current financial year in the backdrop of the April 8 order by the Centre directing all government ministries and departments to curb spending for the first quarter in order to cope with the tightened economic situation in light of the COVID-19 outbreak.
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The Ministry of Finance issued instructions on April 8, citing stressed cash position in the first quarter, to regulate the government expenditure. The ministries and departments of the central government have been placed in three categories- A, B, and C- along with the demands controlled by them.
As per the order, Central government departments and ministries under categories B and C have been asked to limit their first quarter expenditure to 15-20 percent of the year’s budget estimates. Only those departments/ ministries considered "crucial" in the ongoing fight against the pandemic will remain unaffected by this order.
Pointing out that the April 8 order is more likely to remain on paper, he says that "for the financial year 2020-21, the government may likely face additional expenditure demand of about 3 lakh crore".
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He highlights that in contrast to this order, added expenditure may be seen due to the much-needed relief packages.
"The government has announced a 1.7 lakh crore relief package already. It is unavoidable that the government would need to come up with another package for addressing at least 10 crore workers of informal sector which has suffered considerable pain, including loss of wages. It also appears necessary that the government will come up with a package to assist at least the MSME businesses," Garg said.
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