Finance Ministry tightens purse strings for January-March quarter

NEW DELHI: The finance ministry has cut the amount various ministries and department can spend in the last quarter to a maximum of 25% of their budget estimate for the entire financial year, citing fiscal situation.

The earlier limit for the last quarter spending was 33%.

Also, within the 25% cap on spending for January-March, only a maximum of 10% of the total budget can be spent in March against 15% earlier, the economic affairs department has said in an official memo.

“Considering the fiscal position of the government in the current financial year, it has been decided to cap the expenditure in the last quarter/last month of the current financial year…,” it said.

All ministries and departments have been asked to observe the guidelines “strictly and regulate the expenditure accordingly”.

The revised limit means that departments that have not yet substantially utilised their funds will not be able to spend the full budget amount this fiscal.

The government is struggling to meet the fiscal deficit target of 3.3% of the GDP following muted growth in tax revenues because of an economic slowdown. India’s growth fell to a six-year low of 4.5% in the July-September quarter.

Also, the recent reduction in corporate tax to help revive the economy is likely to cost the government Rs 1.45 lakh crore. The government’s fiscal deficit for April-October period was 2.4% more than the full year estimate.

Ratings agencies such as Moody’s Investor Services, Standard and Poor’s (S&P) Global Ratings, and Fitch Ratings have already raised concerns about possible fiscal slippage.