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New spending for FY22 from FM’s latest package to be less than Rs 50,000 crore

If one leaves aside the credit measures and announcements which had already been made earlier, then the extra outlay for 2021-22 as a result of the new announcements will be around Rs 48,900 crore, our calculations show.

June 29, 2021 / 09:46 PM IST
Union Finance Minister Nirmala Sitharaman

Union Finance Minister Nirmala Sitharaman

As per the Finance Ministry, relief package by Finance Minister Nirmala Sitharaman on June 28 is worth Rs 6.29 lakh crore.

However, if one leaves aside the measures on the credit and loan side, discounts the older measures which were repeated, and examines only the additional expenditure in 2021-22, the size of the fiscal outlay does not exceed Rs 50,000 crore, Moneycontrol’s calculations show.

Some of the major announcements like credit guarantee schemes for health sector, tourism, small lenders and others are on the credit side, and do not involve any additional spending by the exchequer.

The measures on additional subsidy for fertilisers and extension of the free foodgrain scheme, while involving major additional expenditure, are older announcements, as Sitharaman herself admitted. These have been written about before here and here.

The measures on reforms in the power distribution sector were announced in the Union Budget 2021-22.

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Click here for highlights of Nirmala Sitharaman's announcements

That leaves the other measures where there will be extra spending on the government’s part. The biggest of these is the new scheme for public health, which will focus on short-term emergency preparedness with emphasis on children and paediatric care. The scheme’s size is Rs 23,330 crore, out of which the centre, as per the presentation shared by Finance Ministry, will spend Rs 15,000 crore this year.

Then, there is the Rs 100 crore borne in giving out five lakh free tourist visas once the centre decides to allow foreign tourists into India again. The expectation is that this will be later this year. Sitharaman also said that the government will revive North Eastern Regional Agricultural Marketing Corp by spending Rs 77 crore this year.

Export Boost

Sitharaman said that a corpus of Rs 33,000 crore will be provided to boost project exports through the National Export Insurance Account and an amount of Rs 88,000 crore will be provided to Export Credit Guarantee Corp to boost exports in general. These will be for a period of five years, from 2021-22 to 2025-26.

The assumption here is that these amounts will be provided entirely by the centre. If one divides the amount equally for each of those five years, then the corpus for both the entities combined comes to around Rs 24,200 in 2021-22.

And then there is the additional outlay for Bharat Net project, to connect India’s villages with broadband internet connection. The outlay will be Rs 19,041 crore in 2021-22 and 2022-23. That means a yearly expenditure of Rs 9,520.5 crore, if divided equally.

All that totals up to Rs 48,900 crore approximately, which is less than 8 percent of the total relief package size of Rs 6.29 lakh crore.

Fiscal Impact

It is worth repeating that some of the measures that Sitharaman spoke about are not new announcements, but will be counted as additional spending in 2021-22. They are quite substantial in size. The additional fertiliser subsidy this year will be Rs 14,775 crore, and extension of the free foodgrain scheme under Pradhan Mantri Garib Kalyan Yojana will cost the exchequer Rs 94,000 crore.

If these are also included to calculate the impact on the centre’s finances, then that number increases by quite an extent. Add on top of that the extra Rs 15,000 crore that the government is expected to spend after centralising 75 percent of the vaccine procurement, then the additional outlay this year could go upto Rs 1.72 lakh crore.



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Arup Roychoudhury
first published: Jun 28, 2021 08:46 pm
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