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FM to keep new expenses outgo within budgeted fiscal deficit
August, 03rd 2011

Seeking to make a strong statement about the government's resolve to stay within the budgeted fiscal deficit, Finance Minister Pranab Mukherjee presented a modest first supplementary for the 2011-12 fiscal.

The government on Tuesday sought Parliament's sanction for an additional 34,724 crore expenditure for 2011-12, but the net outgo was much lower at 9,000 crore.

"I will keep my borrowing within limit," Mukherjee said.

The government has budgeted a net borrowing of 3.43 lakh crore in the current year, representing a fiscal deficit of 4.6% of GDP.

The government has to take legislative approval for spending amounts beyond what it estimates during the budget for the year or adjustments in expenditure between different heads by presenting a supplementary demand to Parliament.

Nearly 26,000 crore of the supplementary demands are 'technical demands' or those seeking Parliament's sanction for use of savings under a different head.

The finance ministry had sent out a strong missive to the ministries and departments, asking them to seek extra funds only for unavoidable expenditure.

"Proposals involving net cash outgo of 9016.06 crore will not have any adverse impact on fiscal deficit projected in the budget estimate of 2011-2012, as there would be overall savings in other grants," the government said in its documents proposing extra expenditure.

The C Rangarajan-headed Prime Minister's Economic Advisory Council on Monday said the government should ensure that it stays within the budgeted fiscal deficit of 4.6% for the current so that demand pressure are contained, but warned that it may not be an easy task.

There is a general consensus that the government will overshoot fiscal deficit sharply in the current year because of higher-than-budgeted subsidy. The Food Corporation of India has demanded an extra 35,000 crore while the government has exhausted the petroleum subsidy provided in the budget.

Any extra borrowings by the government will put pressure on interest rates and also deny credit to industry when the recovery sets in.

The additional grants include 2,300 crore for the BPL survey, 2,375 crore to meet the enhanced allocation to Member of Parliament Local Area Development Scheme, 1,500 crore for increased allowance to anganwadi workers, and 435 crore to Air India for maintenance of aircraft used for VVIP travel.

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