Finally, a cap on govt spending, but will it work?

Fiscal deficit. Those two words must surely be giving Finance Minister Pranab Mukherjee some sleepless nights.

The ever-increasing gap between what the government earns and what it spends has been a source of concern for not just the government, but also economists and investors.

Now, the government may be stirring into action. If the Business Standard report is anything to go by, the government might soon place a cap on its spending by forbidding departments from spending more than one-third of their total budgets in the final quarter of the current financial year ending March.

Nearly all government departments have spent less than two-thirds of their allocated budget in the first three quarters.

The newspaper report said that nearly all government departments, generally speaking, have spent less than two-thirds of their allocated budget in the first three quarters. If the spending limit is enforced, no department will be able to spend its full budget.Over all, ministries have spent around 63 percent of their allocated budgets this financial year, according to the report.

For the government, the lower spending will give it some relief - and help the Finance Minister in his calculations of the fiscal deficit for the next year.

The fiscal deficit for the year ending March 2012 is estimated to hit 5.6 percent or more, up from the original target of 4.6 percent.