Finance ministry to start Budget 2016-17 exercise a month early

 

A file photo of the ministry of finance. The budget-making exercise usually begins every year in the second week of September with the issue of budget circulars to all departments. Photo: HT

The finance ministry has advanced the budget-making exercise by a month to August to facilitate wider consultation with stakeholders. The ministry will soon issue the budget circular seeking financial details from departments, the finance ministry said on Monday.

“In consonance with the objective of the government of India to have wider consultations with various stakeholders as well as to provide more time for planners, it has been decided to start the Budget exercise by middle of August 2015 for the forthcoming Financial Year 2016-17,” the finance ministry said in a statement.

The budget-making exercise usually begins every year in the second week of September with the issue of budget circulars to all departments providing guidance in framing their “revised estimates” for the current year and the “budget estimates” for the next financial year.

October and November are devoted to follow-up action on the budget circular, including coordinating with various ministries and departments, procuring data for the receipts budget, and scrutiny of the estimates framed by the ministries and departments for the pre-budget meetings.

The budget for the next fiscal will be crucial as the government is gearing for the implementation of “One Rank One Pension” for military personnel as well as the 7th Pay Commission, which is expected to submit its report in September.

The finance ministry is apprehensive about the recommendations of the Seventh Pay Commission which is likely to significantly increase the revenue expenditure of the government in the next fiscal, leaving it less money to spend on building capital assets.

In the medium-term expenditure framework statement laid before Parliament last week, the finance ministry said salary and pension expenditure is expected to rise by about 16% each in 2016-17, which may leave capital expenditure room to grow by no more than 8% during the year.

Total revenue expenditure is expected to jump 8.1% to Rs.16.6 trillion in 2016-17 against a budgeted growth of 3.1% in 2015-16.  During the same period, the growth in capital expenditure is expected to slow to 8%, at Rs.2.6 trillion, from a budgeted growth of 25.4%.

The finance ministry said the award of the Seventh Pay Commission’s suggestions, with their consequent impact on government finances, “poses a risk”.

“The Pay Commission impact may have to be absorbed in 2016-17. The phase of consolidation, extended by one year, will also be spanning out in this period. Thus, in the medium-term framework, the fiscal position will continue to be stressed,” the finance ministry said in the 2015-16 budget presented in February.

The Union budget cut the plan expenditure for the first time in many years by Rs.2,657 crore to Rs.4.7 trillion in 2015-16 from the revised estimate of 2014-15, as the centre shared an additional Rs.1.86 trillion with states.

The Finance Commission has raised the share of states in net central taxes to 42% from 32%.

The tight fiscal situation forced the government to revise its fiscal consolidation roadmap and set a less ambitious fiscal deficit target of 3.9% of gross domestic product for 2015-16, against the target of 3.6% set in last year’s budget.

During the first quarter of the current fiscal year, the central government exhausted 51.6% of its fiscal deficit target, against 56.1% during the same period last year. Capital expenditure in building durable assets during the said time was 25.4% of the budgeted amount, compared to 18.6% during the same period a year ago.

The government expects growth to be around 8% this year while most external agencies have put it in the range of 7.5-7.8%.

Source: livemint.com