Budget advancement helps Centre, states start spending early
April, 10th 2017
Advancing the Budget and notifying the Finance Act, 2017, have enabled the Centre and state governments to start spending from the first month of the financial year from the central funds.
Earlier, expenditures for current liabilities such as salaries and pensions used to be incurred from April and for the rest of the crucial outlays would have to wait till the enactment of the Finance Act, which used to happen in June. By that time, the monsoon would have arrived and farmers would have already started sowing.
Early release of expenditure, particularly capex, is all the more relevant at the current juncture, when the economy is taking time to recover after demonetisation of Rs 500 and Rs 1,000 currency notes.
Economic growth had slowed to 7.1 per cent in 2016-17 against 7.9 per cent in the previous year. The economy is not likely to come back to the growth rate clocked in 2015-16 in two years, according to various estimates.
As such, the government is expected to release almost 50 per cent of the Rs 48,000 crore allocated under the Mahatma Gandhi National Rural Employment Guarantee Act in 2017-18. The government will also be releasing Rs 20,000 crore to the Food Corporation of India this month to start procurement in Punjab and Haryana. Also, a chunk of the Rs 1.45-lakh-crore food subsidy would also be allocated this month itself, sources said.
Lok Sabha Speaker Sumitra Mahajan said the funds allocated to each department have become available to them on April 1 and the departments have a full year to spend the money.
graph She said that for the past many decades, the Budget used to be presented on the last day of February, sometimes in March or April, and a four-to-five-month delay in budgetary allocations was part of the process. This timely, completion of all Budget-related processes would also help the state governments in preparing their respective Budgets, she added.
Besides expenditure, other things that would be effective from the very beginning of the financial year are the new income-tax return forms, including a one-page form for those having salaries of up to Rs 50 lakh and one rental income. Earlier, income-tax returns used to get notified somewhere in May.
The new norm to limit cash spending per transaction to Rs 2 lakh also came into effect from April 1. Those spending more than this would have to pay a penalty equivalent to the amount of spending.
However, mandatory quoting of Aadhaar in the returns will not come into effect from April 1. This will be effective from July 1. By June, one can file returns without quoting Aadhaar.