Plan panel may get modest increment

NEW DELHI: The finance ministry has indicated a modest increase in budgetary support to the central Plan, as it looks to achieve fiscal consolidation through cuts in public spending and an early exit from economic stimulus measures announced last fiscal to counter the economic downturn.

It is suggesting a budgeted expenditure, or gross budgetary support (GBS), of around Rs 362,000 crore for 2010-11, which is over 11% more than last year’s Rs 325,000 crore, a government official said, requesting anonymity.

The Planning Commission had demanded an 18% increase over last year’s allocation. The proposed figure is about Rs 21,400 crore less than its initial demand.

A final decision will be taken at a meeting between finance minister Pranab Mukherjee and Planning Commission deputy chairman Montek Singh Ahluwalia after the latter returns from the World Economic Forum meeting to be held in Davos, Switzerland. The two had met last week to resolve the issue.

“Traditionally, the Planning Commission’s demands are on the higher side. But the finance ministry has to take a conservative approach as it is responsible for mobilisation of resources,” said another government official.

While the finance ministry sanctions the budgetary support, the responsibility of distributing it judiciously among ministries, departments and state governments rests with the Planning Commission.

The planning body had justified that it needed funds for new schemes. Its demand was well below the 82% hike sought jointly by ministries and departments.

The finance ministry says the UPA government has already committed huge sums for its flagship programmes and social sector development in the last 5-6 years. An 18% increase on a higher base is quite high in absolute terms, the ministry is believed to have reasoned. In 2009-10, GBS was raised by 17% to Rs 325,000 crore over the revised estimates for 2008-09.

The hard line from the finance ministry reflects an attempt to rein in the fiscal deficit, which is at a 16-year high of 6.8% of the gross domestic product in 2009-10. The country’s GDP grew 6.7% in 2008-09 after recording 9%-plus growth in the three preceding years. Three stimulus packages announced by the government have put the economy back on track, but pushed fiscal deficit to record levels.

“Now it is time to consolidate. While some programmes have been successful, many schemes didn’t do well due to poor implementation by states. Even economic stimulus has served its purpose. A rationalisation in resource allocation is expected this time (in this budget),” said the official quoted second.

Officials have defended the conservative approach in allocating resources saying it will force various agencies to utilise funds prudently. GBS determines annual budgets for central ministries and the central assistance to state governments.