Covid-19: Government likely to face additional expenditure demand of 3 lakh crore, says Garg

Former finance secretary Subhash Chandra Garg on Tuesday said the Budget 2020-21 has started falling apart as COVID-19 has struck a massive blow to the economy, and the government may face additional expenditure demand of about 3 lakh crore this fiscal.

In a blogpost, Garg said the state governments finances have suffered more and they are also demanding support package and the central government will sooner or later will have to address these demands.

“Budget 2020-21 of the central government has started falling apart even when the financial year has just begun. COVID-19 has struck a massive blow to people, economy and budget.

“…For the financial year 2020-21, the government may likely face additional expenditure demand of about 3 lakh crores,” he said.

The central government’s budgeted expenditure for 2020-21 is Rs 30.42 lakh crore or a little over USD 400 billion at Rs 75 to a dollar.

There is growing chorus for more fiscal measures for supporting businesses especially small informal businesses and millions of workers rendered jobless by the lockdown of economy, Garg said, adding that “increasing expenditures and declining revenues will push fiscal deficit sharply”.

The former finance secretary pointed out that revenues are badly hit, demand for petroleum products has almost collapsed, hurting customs and excise revenues.

“Disinvestment programme is totally grounded. Non-tax revenues will suffer in line with declining or disappearing profits of public sector entities,” Garg said.

Referring to the central government’s package of Rs 1.7 lakh crore, he said this might require about Rs 75,000-80,000 crore of additional expenditure beyond what was budgeted.

Garg pointed out that about 30 per cent of annual budgeted expenditure is incurred in first quarter, as per the trend, after the government started presenting budget on 1st February in 2017.

Referring to the Finance Ministry’s decision on April 8 to impose curbs on non-essential head, he said, “April 8 order is more likely to remain on paper”.

The Finance Ministry had imposed spending restrictions on various ministries and departments in view of the revenue constraints caused by the COVID-19 crisis.