At a time of slowing economic growth following the demonetisation announcement, on Wednesday the government sought sanctions from the parliament for additional spends of nearly 60,000 crore, involving cash outgo of over Rs. 35,000 crore for higher spends on rural employments guarantee scheme along with pension liabilities of retired government employees.
In the follow-up to the cash ban and shortfalls in the telecom spectrum sale and low investment period, the economy has taken a hit. However, a part of the shortfall could be met through tax amnesties and collections via the Income Disclosure Scheme. The government could also attempt to stick to the fiscal deficit target of 3.5% of GDP which could help in saving.
During the ongoing phase of low spending by private sector, the government has also found it difficult to accumulate surplus funds for infrastructure creation. The second supplementary demand for grants has no fresh allocation for printing notes.
Higher farm spending has also been earmarked by the government via the cess that is levied on service tax, amounting to little more than Rs. 3,000 crore. Also an amount of Rs.1,500 crore for sanitation has been carved out from cess.
