Data compiled by a key government accounting body pointed to a sharp fall in spending by several major ministries in June, raising fears of further slowdown in the economy.

Share Market Live

NSE

Capital expenditure by the ministries of road transport and highways, railways, power, agriculture and rural development, to name a few, have dropped significantly, according to Controller General of Accounts (CGA). For instance, the road transport and highways ministry has spent only 1 percent of its capital expenditure budget of Rs 72,000 crore up to June 2019 compared with a 37 percent spend from a year earlier.

Spending by these ministries is vital to keep India’s economy humming.

The CGA, housed under the Department of Expenditure in the finance ministry, is the main accounting adviser to the central government. It is tasked with establishing and maintaining “a technically sound management accounting system”.

The CGA data underscores the multiple dilemmas the government faces on the fiscal front — how tax collections have been affected by the economic slowdown, how it cannot be lavish with spending for fear of breaching the fiscal deficit target and how it cannot boost growth due to the spending constraints.

While the expenditure cycle looks worrying, corporate tax collections also seem to be struggling to keep pace with the budget estimates. While the first quarter is generally discounted for tax refunds on the part of the government, the net tax receipts up to June this year are 14.7 percent lower than the budget estimates compared with 16 precent achieved a year earlier.

Devendra Kumar Pant of India Ratings said while the first quarter tax collections are affected by tax refunds of the previous year, current growth momentum will have an impact on tax collections. “And while the income tax and CGST collection growths are relatively better, the corporate tax collection growth seems to resemble the first quarter corporate results."

India’s GDP growth cooled to 6.8 percent in the year ended March, the slowest rate at which the economy expanded in five years.

The CGA data points to more pressures on the economy.

According to the CGA, capital expenditure up to June is lower at 18.8 percent of the FY20 budget estimate compared with 29 percent of the FY19 budget estimates. While revenue expenditure has almost kept pace, 27 percent of this fiscal's budget has already been spent compared with 29 percent in the last financial year.

Thus, revenue expenditure, or the subsidy expenses, by the oil ministry, fertilizer ministry and food and consumer affairs ministry (read food subsidy) are seen to be growing at a higher pace compared with last fiscal. So much so that the oil ministry is likely to exhaust the FY20 allocation of roughly Rs 41,000 crore for LPG and kerosene subsidy by the end of this calendar year.

In stark contrast, spending by some of the key ministries is much lower than that of last fiscal.

The railways ministry, with a capital expenditure budget of almost Rs 65,000 crore has spent 25 percent of this amount up to June. Remember in FY19, the railways had spent 33 precent of its budget during the first quarter.

The ministry of rural development, which handles the job-generating MNREGA scheme, has spent only 29 percent of its massive budget allocation of Rs 1.17 lakh crore this quarter. It has spent 39 percent of its FY19 budget allocation in the same period a year ago.

Spending by the power ministry has nearly halved to 28 percent of the FY20 budget from a year earlier.

Likewise, the agriculture ministry, with a corpus of Rs 75,000 crore for the PM-KISAN scheme, is showing a spending of 15 percent of its FY20 budget in the first quarter compared with 40 percent a year earlier.