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Budget 2013: Planning Commission hints at keeping developmental spending flat
January, 22nd 2013

The budget is likely to keep developmental spending in the upcoming year at the current year's level, an official has hinted, indicating that the pressure to deliver a strong fiscal consolidation message may rein in allocations.

The government sets aside funds for its various development schemes as plan expenditure, most of which finances the central plan while some of it is used to support states' plan. The allocation to the central plan is referred to as gross budgetary support.

To stay within this fiscal's revised deficit target of 5.3% of GDP, the finance ministry has drastically cut allocation to various ministries under plan expenditure of Rs 5.21 lakh crore. The plan size is likely to remain at this level, the official said, indicating that there could be only a small increase over the revised estimates for 2012-13.

"Budget support will be keeping in line with the next financial year's fiscal deficit target of 4.8% of GDP. There could be a nominal rise over revised estimates," the official, who is privy to the deliberations, told ET. The gross budgetary support to the 12th Plan has been pegged at Rs 35.68 lakh crore, or 5.23% of the GDP, which will be spread over five years, beginning 2012-13.

The National Development Council, which is headed by the prime minister, had scaled down the growth projection for the 12th Plan to 8%, but kept the resources available unchanged despite the finance ministry's insistence that the total support should be cut by at leastRs3 lakh crore.

The ministry was assured that the adjustments, in line with the available resources, would be done at the time of finalising the annual plan. North Block, which has already axed allocations of several departments and ministries for this fiscal, does not have much room in the coming year, as it cannot send out any signal of deviation from the fiscal consolidation roadmap.

The finance ministry is expected to keep allocations of a number of schemes at the current budget's levels, with some schemes, barring 16 flagships, likely to face the axe from next fiscal. Of the 147 central schemes at present, the government has decided to cut 88.

Although this restructuring is expected to happen over the next two fiscals, the finance ministry is pushing for significant forward movement in the coming year.

In 2012-13, technically the first year of the 12th Plan, the budget support to the central plan was pegged at Rs 3,91,027 crore. But with allocations being slashed with an iron hand, it is expected to see a substantial reduction in the revised estimates.

In 2011-12, North Block had slashed the budget support by over Rs 14,000 crore to Rs 3,21,406 crore. The Planning Commission had asked the ministries to give their estimates for the next fiscal based on increases at rates of 5%, 10% and 15%, but within a fifth of the total plan support available to them. However, a substantial increase seems unlikely, another official said. The Five-year Plan is split into five annual plans and the finance ministry provides support for them from the annual budget. The Planning Commission then allocates it to ministries, departments and state governments.

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