Downturn tugs at the govt treasury

The Planning Commission may have to downsize even the flagship social security schemes after the elections. The reason: a drastic fall in the government’s revenues due to the economic slowdown, reports Chetan Chauhan.

The Planning Commission may have to downsize even the flagship social security schemes after the elections. The reason: a drastic fall in the government’s revenues due to the economic slowdown.

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“We are thinking of a cut during the 11th Plan period,” confirmed commission member Abhijit Sen.

He said the plan projections had focused on education, health, poverty alleviation and social security on the basis of a growth assumption of 8.5 to 9 per cent.

But since the government’s revenue receipts are steadily falling behind targets, the revised tax collection estimate for 2008-09 was scaled down in December 2008 by Rs 60,766 crore from the budget estimate of Rs 6,87,715 crore to Rs 6,27,949 crore.

On the other hand, the Reserve Bank of India (RBI) estimated in March that the states’ non-development expenditure would go up by Rs 34,590 crore (14.4 per cent) from Rs 2,41,019 crore in 2007-08 to Rs 2,75,609 crore this fiscal because of higher salaries, infrastructure maintenance and loan repayments.

What’s more, Sen said job losses, especially in the unorganised sector, would jack up the expenditure on the National Rural Employment Guarantee Scheme (NREGS), one of the biggest showpieces of the United Progressive Alliance government.

A Rural Development Ministry report said enrolment under the NREGA had already gone up. "People losing jobs in sectors like textiles and diamond-cutting are going back to their villages and getting enrolled under the NREGA," Sen said.

He said the economy could not absorb the 20 million people that enter the job market every year. A senior Planning Commission advisor said, “Even when the economy was booming, only 60 to 70 per cent of the new entrants were getting jobs.”

However, the Finance Ministry will take a final call on the expenditure on the basis of the size of the fiscal deficit it will decide to project in the Budget to be placed after the elections.