Dumb and Dumber: Facing slowdown, govt squeezes expenditure -Subodh Varma
Rather than spending more, government expenditure by July 2019 is less than what it was last year as share of annual budget, with key public welfare related ministries cutting most.
India is facing an unprecedented slowdown of the economy with GDP growth slumping to 5% in the June quarter, agriculture growing by only 2% and manufacturing by a mere 0.6%. Private consumption expenditure – spending by families on consumption – has slipped downwards, bank credit has decelerated, and there are reports of widespread job losses from across the board while monthly unemployment has climbed to a record 8.3% in August as per CMIE estimates.
This is a situation that is crying for more public spending which would kickstart the economic cycle, put more money in the hands of people to spur demand and pave the way, hopefully, for more private investment. Yet the Modi government, a prisoner of the discredited neo-liberal dogma, is sticking to squeezing public spending. Latest details of government revenues and expenditure as released by the Controller General of Accounts (CGA) for July 2019 show this in indisputable terms.
Here’s the big picture: total government expenditure (as share of annual budgeted expenditure) is down to 34% by July this year compared to 36% up to July 2018. [See chart below] This is made up of two components, revenue and capital expenditures. Of these, the latter is drastically down from 37% last year to 32% this year. Capital expenditure is investment in plant and machinery, buildings, roads and other infrastructure.
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