Bowing to pressure from his colleagues, finance minister P Chidambaram has reportedly agreed to a meager hike of 5.8% or Rs. 30,000 crore in money for welfare measures in next fiscal as compared to the funds provided for the same in the current financial year.
The increase would, however, be lowest in nine years of the UPA government and comes at the time when economy is struggling to revive.
Chidambaram's intention to walk the talk on fiscal discipline by controlling expenses had run into stiff resistance from ministerial colleagues including rural development minister Jairam Ramesh and defence minister AK Antony, who wanted substantial increase to push government's social inclusion programme during the crucial election year.
The finance minister initially wanted to increase the funding by around 15% of the revised budget estimate for 2012-13 but after deliberations at the highest level in the government he has told the Planning Commission to increase funding based on the original budget estimate.
The government's support to the central plan is called the gross budgetary support, or the GBS.
For 2012-13, the GBS was originally pegged at Rs. 5,21,000 crore, which later was slashed by 20% or to around Rs. 4,16,000 crore in the revised estimate.
The money for welfare measures is funded almost equally from government's own accounts or the annual budget and the resources that flow in from public enterprises.
Liming the flow for GBS helps the government to keep a tap on fiscal deficit, which the finance minister wants to keep below 5.3% of the Gross Domestic Product.
The increase, government sources, said was in line with the UPA's priority to health, education and environment sectors in the 12th five year, which implementation would start from next financial year.
As a result, the panel panel, which allocated funds to ministries on GBS decided by the finance ministry, has indicated at a "good" increase in funding for ministries such as agriculture, education, water and health. But, rural development and economic ministries are likely to face a cut for fiscal prudency.
Government sources said that the allocation for the HRD ministry is expected to be increased by Rs. 4,500 crore from Rs. 61,407 crore provided in the last budget with increased focus on improving quality of higher education.
The health ministry is expected to get additional Rs. 2,500 crore to strengthen public health measures including providing free generic medicines through government hospitals.
The water resources ministry is expected to get maximum increase of about 10% to supplement the agriculture sector, for which the government would be providing about 1,500 crore more.
The rural development ministry would face a budget cut of about Rs. 1,000 crore despite Ramesh seeking Congress president Sonia Gandhi's intervention to prevent fund pruning.