Budget 2021: FY21 May Not Be Used As Base For Allocations, Says Report

With the government making large-scale expenditure switching among departments in the current fiscal year to cater to more spending, the government will not use Budget FY21 as the base for deciding allocations in the upcoming Budget.

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Budget 2021: Ahead of the Budget to be presented by the finance minister Nirmala Sitaraman on February 1, it is reported that the government will not use Budget FY21 as the base for deciding allocations for various ministries in the upcoming Budget. As per the report in business daily Mint, the ministry will not use Budget FY21 as the base since the government has ended up making large-scale expenditure switching among departments in the current fiscal year leading to more spending amid the pandemic.

As per the sources quoted in the report, FY21 being an extraordinary year, it cannot be used as a base year. It may use FY20 as the base year for resource allocation for FY22.

The report also mentioned that as per the budget estimates of FY21, total expenditure was set to increase 12.7% to ₹30.4 trillion but due to pandemic, the government made substantial reallocations within various ministries. Fr instance the ministry of consumer affairs, food and public distribution has crossed its budget allocations (113%), the ministry of rural development (120%), while the ministry of culture has spent 39% of its allocation by end November, as per the report.

What experts say?

The report quoted former chief statistician of India Pronab Sen supporting the move saying it is a sensible thing to do. The economist ponted out that it is an abnormal year and if it used as a base besides applying historical trends to it it will get abnormal numbers. The economist suggested one-year extrapolation, where one uses the previous year and extrapolate for the coming year. “Now, you can use two years or three years extrapolation. So, you are extrapolating for two years using FY20 as the base year," Sen explained in the report.

Sen also mentioned that the FY22 budget should signal a return to the normal. Infact, the 15th Finance Commission also faced a similar problem in estimating the resource devolutions to the state governments.

The country is gearing up for its first paperless budget in history and finance minister Nirmala Sitharaman also launched a new mobile app by the name 'Union Budget Mobile App' for hassle-free access to Budget documents by the MPs and the general public using the simplest form of digital convenience. The economy is officially projected to contract by a record 7.7% in FY21 for the first time in 41 years with National Statistical Organisation assuming 0.6% growth in the second half (October-March) of FY21.