An excess of over Rs 17,444 crore (Rs 174.44 billion) in the non-plan expenditure has pushed the total expenditure of the Centre to almost 50 per cent of the budget estimates in the first half of 2003-04, as compared to 39.6 per cent in the corresponding period of the previous year.
The excess is due to a sharp rise in food subsidies, interest and payment to financial institutions.
The mid-year review of the economy has therefore underlined the need for fiscal consolidation as one of the hindrances towards accelerated growth.
Giving a detailed break up of the trend in expenditure, the review said non-plan expenses have exceeded that of the last financial year by a level of Rs 50,046 crore (Rs 500.46 billion) in absolute terms.
This is nearly 13 per cent of the budget estimate for the total expenditure of the current financial year.
The review said revenue collections in 2003-04 are likely to meet the targets, in spite of a shortfall in central excise duties, which have dropped by 1.7 per cent partly due to a sluggish growth in the petroleum sector.
But service tax collections have touched Rs 2,895 crore (Rs 28.95 billion) in the period between April and September, which is 50 per cent more than recorded in 2002-03.
Within the excess non plan expenditure, Rs 32,602 crore (Rs 326.02 billion) has been contributed to funds received through the states' debt swap scheme. This sum has been booked as transfer to National Small Savings Fund.
The worrying factor, however, is the rise in the level of subsidies, which have climbed by Rs 9,744 crore (Rs 97.44 billion) over that of the corresponding period in 2002-03.
Interest payments as well as payments to financial institutions have risen by Rs 2,854 crore (Rs 28.54 billion) and Rs 2,381 crore (Rs 23.81 billion), respectively.
The rise in interest payments is significant as the finance ministry had developed a system of monthly clearance of interest dues from the last financial year.
The net collection for the Centre after transfer to states was Rs 65,057 crore (Rs 650.57 billion), which is one per cent lower than that of 2002-03.
It said the tax collection efforts mounted by the revenue department have started bearing results.
The finance ministry has for the first time released the break up of outgo under major subsidies estimated at Rs 26,495 crore (Rs 264.95 billion) in the first half of 2003-04.
This includes Rs 16,006 crore (Rs 160.06 billion) in the food sector, Rs 6,703 crore (Rs 67.03 billion) in fertilisers and Rs 3,730 crore (Rs 37.30 billion) in petroleum.
The review also specified wiping of arrears in refund of direct taxes to accelerate their growth in the coming quarters.
The review while accepting the revenue department's explanations said the change over to monthly system of paying tax dues from a fortnightly one and a liberalised CENVAT credit rules have affected collections, which have touched only Rs 34,275 crore (Rs 342.75 billion) as against Rs 33,704 crore (Rs 337.04 billion) in the April to September period of 2002-03.
But since excise duty have been 77 per cent more than the first quarter, budget estimates would be met if the spurt is maintained. However, excise tax remained a point of worry, it said.
The cash management scheme for nine central ministries showed the overall actual expenditure of Rs 38,067 crore (Rs 380.67 billion) was 85 per cent of their projected cash requirement.
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