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Budget 2017: Govt likely to rationalise social schemes, allot more to infra

In Budget 2017, the finance ministry is likely to allocate more money to infrastructure ministries that have met their capital expenditure targets. The money will come from rationalising social sector schemes run by the centre and the states, say top sources in the finance ministry.

business Updated: Jan 02, 2017 14:35 IST
Suchetana Ray
Finance Minister Arun Jaitley will look at ways of boosting public spending in infrastructure, as he presents his third budget in February 2017.
Finance Minister Arun Jaitley will look at ways of boosting public spending in infrastructure, as he presents his third budget in February 2017.(Hindustan Times)

In Budget 2017, the finance ministry is likely to allocate more money to infrastructure ministries that have met their capital expenditure targets. The money will come from rationalising social sector schemes run by the centre and the states, say top sources in the finance ministry.

“The government will streamline centrally sponsored schemes from 66 to 28. There will be sunset clauses introduced to phase them out,” said a top official in the finance ministry, who did not wish to be quoted. The 1,200 schemes handled by states will be reduced to 300.

A team of central and state government officials are already working on streamlining the schemes, the official added. “In many cases a number of schemes can be re-arranged under one scheme.”

The schemes are being reviewed on the basis of their outcomes.

“The money saved will be given to ministries such as defence, highways, railways, power etc, which have met their capital expenditure targets ” said another finance ministry official.

Higher allocation to ministries handling infrastructure projects will boost public spending, especially at a time when private investment is yet to pick up.

While the government is keen to boost spendings, a stiff fiscal deficit target has not left the government with much elbow room, sources said.

The government has set a fiscal deficit target of 3.5% of GDP for the current fiscal. However, the spectrum auction has not yielded the desired results, and the implementation of the Seventh Pay Commission is also likely to lead to an additional R1.02 lakh-crore outflow from the government. The bank recapitalisation exercise may also require more than the estimated R25,000 crore.

“The need to boost infrastructure spending is a necessity, as well as a focus for the Indian economy. A review of the centrally sponsored schemes a welcome move,” one of the economic advisers to the finance minister added.

According to an internal study by the country’s largest lender, State Bank of India, the most disturbing sign in the economy has been the sharp decline in the growth of gross fixed capital formation -- a proxy for investment activity -- to (–)3.1% in the first quarter (April-June) of 2016-17 from a peak of 9.7% in the second quarter (July-September) of the previous fiscal. “This trend need to be reversed, and we need to ensure that the ensuing growth is likely to be more investment-driven rather than consumption driven,” the report had said.

While the railways ministry’s long-pending demand for a R5,000-crore fund for the development of infrastructure projects is still pending with the finance ministry, the road transport ministry has sought a 63% hike in budgetary allocations to around R90,000 crore for 2017-18, compared to R55,000 crore allocated for the current fiscal.

(with inputs from Mahua Venkatesh)