FinMin seeks parliament nod for extra gross expenditure of Rs 1.87 lakh crore

Finance Minister Nirmala Sitharaman

Finance Ministry, on July 20, tabled the Supplementary Demand for Grants in Parliament to seek approval for additional gross expenditure of Rs 1.87 lakh crore. Out of this, Rs 23,675 crore is the extra net cash outlay, while the remaining amount of Rs 1.64 lakh crore is matched by savings of the ministries/departments or by enhanced receipts and recovery aggregates.

The biggest items of extra outlay for which Parliamentary approval is being sought includes Rs 10,728 crore for meeting expenditure towards grants-in-aid under National Rural Health Mission and India COVID- 19 Emergency Response and Health System Preparedness Package, Rs 1,750 crore for compounded interest support to lending institutions under the loan moratorium scheme, and Rs 1,872 crore for loans and advances to Air India for recoupment of advance from Contingency Fund of India.

“The net cash outgo component of the First Supplementary demand for grants for FY2022 is quite modest at Rs 23,675 crore, which is dominated by the health sector. The bulk of the gross expenditure pertains to the back-to-back loans of Rs 1.58 lakh crore for providing GST compensation to the states, which does not affect the centre's fiscal deficit,” said Aditi Nayar, Chief Economist with ICRA Ltd,.

However, some big spending items, which were announced earlier, are missing from the Supplementary Demand for Grants. These include additional fertiliser subsidy of Rs 14,775 crore, and extension of the free foodgrain scheme under Pradhan Mantri Garib Kalyan Yojana, which will cost the exchequer Rs 94,000 crore, and the extra Rs 15,000 crore that the government is expected to spend after centralising 75 percent of the vaccine procurement.

On top of all this, the extra spending this fiscal year from the Covid-19 relief measures announced by Finance Minister Nirmala Sitharaman on June 29 is expected to be around Rs 50,000 crore, as reported earlier.

It should be remembered that the Finance Ministry will table two more Supplementary Demand for Grants for 2021-22 in the Winter and Budget Sessions of Parliament.

“It appears that the outgo of more than Rs. 90,000 crore for the free foodgrain provision in May-November 2021, is being absorbed by the cushion created in this year's budget, on account of the prepayment of the FCI's loans to the NSSF in FY2021,” said Nayar. She added that the cash flow position of the centre seems quite comfortable.

“However, the pending GST compensation for the period April 2020-March 2021 has been pegged at a sizable Rs 81,179 crore. The financing options for the pending dues for April 2020-January 2021 remain unclear,” Nayar said.