To spur growth in Q4, FinMin to loosen purse strings for some ministries

To boost expenditure in the January-March quarter, Finance Ministry is likely to permit some ministries and departments to spend over and above quarterly and monthly expenditure limits. The move comes in the backdrop of a slowdown in capital expenditure in the April-September half which has impacted economic growth.

As per the cash management guidelines, 56 ministries and departments are required to make monthly or quarterly expenditure plans and normally, they are permitted to spend up to 25 per cent of Budget Estimates in each of the first three quarters (April-June, July-September and October-December). For the fourth quarter (January-March), the cap is 33 per cent along with the last month capping of 15 per cent. These limits are to factor in cash flow and even spreading of expenditure in 12 months.

Officials said relaxation is likely to be given on a case-to-case basis. “Blanket relaxation may not be given. However, if any particular Ministry or Departments seek relaxations, it may be allowed,” a senior Government official said.

Earlier in September, the Finance Ministry had said that in order to provide requisite operational flexibility to execute the budget, stipulations applicable to big releases (₹500 crore or more) for all items of expenditure in the current fiscal will be relaxed. This relaxation would be subjected to compliance of guidelines of the SNA (Single Nodal Agency)/CAN (Central Nodal Agency) and of MEP (Monthly Expenditure Plan) and QEP (Quarterly Expenditure Plan).

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These adjustments follow latest data from the Controller General of Accounts (CGA) that showed that total expenditure during April-November was 57 per cent of the Budget Estimates (BE), lowest in the last four years. Lower expenses have also impacted on economic growth in July-September quarter (Q2) and April-September half (H1). Hoping for a better performance in the second half, the government is relaxing curbs on expenditure. Officials quoted various studies which show that ₹1 spent on capex has a multiplier effect of ₹2.45 in the immediate year, and ₹3.14 in the following years.