The finance ministry will start a crucial exercise from October 16 to prepare the annual Budget for FY22. This will also enable the government to reassess its finances for firming up the revised estimates of its account for the current fiscal, which has gone haywire in the wake of the Covid-19 outbreak.
The exercise comes at the most challenging time when the pandemic has ravaged the economy and caused a slide in revenue collection, limiting the government’s ability to stir growth through a massive public expenditure drive.
A senior government official said the Budget-making exercise for FY22 is going to be an extremely hard task, given uncertainties across variables, including potential revenue collections and expenditure requirement to bring the economy back on its feet.
As such, all the FY21 Budget calculations made before the pandemic have gone for a toss, and the government was forced to announce a steep 54% hike in its full-year gross market borrowing plan to a record `12 lakh crore in just over a month into the current fiscal.
The Budget estimates for 2021-22 will be provisionally finalised after the expenditure secretary wraps up discussions with other secretaries and financial advisers. Pre-Budget meetings are expected to continue until the first week of November.
It will be the third Budget (including an interim one) of both the Modi 2.0 government and finance minister Nirmala Sitharaman.
A number of established agencies have already projected a steeper GDP slide (some expect it to be as much as 15%) in FY21 than assumed earlier, after the government announced a record 23.9% contraction, the sharpest among the G-20 economies, in the June quarter.
While most agencies have predicted a recovery in FY22 (S&P projects a 10% expansion next fiscal), some of them have cautioned that it will be greatly aided by a favourable base and a meaningful rebound will take time to materialise. S&P expects a permanent loss of 13% in output over the next three years.
The Modi government had scrapped a colonial-era tradition of presenting the Budget at the end of February each year. Subsequently, former finance minister Arun Jaitley had for the first time presented the Budget on February 1, 2017.
Since the Budget date has since been advanced, various ministries are now allocated their budgeted funds from the start of the financial year beginning April. This enables the departments greater flexibility as well as time to spend and suitably adjust their business plans.