Finance ministry wants all ministries to control expenditure, issues directive

The domains where a 20% reduction in expenditure has been suggested include overtime allowance, domestic and foreign travel, rents, minor works and maintenance, advertising, grants in aid and petrol among others.

The Union Finance ministry headed by Nirmala Sitharaman has issued a directive to all ministries and departments to reduce their controllable expenditure by 20%. The ministry has also suggested domains where the reductions can be made including advertising, office expenses and overtime allowance. The decision has been taken in view of increased expenditure the union government faces due to the centralisation of vaccine procurement and extension of the free food ration scheme, as announced by PM Modi earlier this week.

According to the directive issued on June 10, “Government has decided all ministries and departments should take steps to curb wasteful expenditure.” However, the finance ministry has exempted spending on the COVID-19 pandemic from any cost-cutting.

The domains where a 20% reduction in expenditure has been suggested include overtime allowance, domestic and foreign travel, rents, minor works and maintenance, advertising, grants in aid and petrol among others.

It may be recalled that on Monday, Prime Minister Narendra Modi had addressed the nation and made a slew of announcements including centralisation of vaccination and extension of the free food program PM Garib Kalyan Anna Yojana till November.

According to rough estimates, the change in vaccine policy will increase the government’s vaccination spending to Rs 50,000 crore from the budgeted amount of Rs 35,000 crore. The Garib Kalyan Yojana will consume an additional amount of Rs. 1 lakh crore. Earlier this year, the Modi government had also decided to increase the subsidy on fertilisers, putting further pressure on its exchequer.

Experts feel that the increasing expenditure would worsen the government’s fiscal deficit which could have an effect on the country’s sovereign credit rating.

While the government wants to cut unnecessary expenditure, it is also promoting the ministries to spend their capital expenditure. In April 2021, The Department of Expenditure of the Finance ministry loosened the expenditure management rules to encourage capital spending.

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