Budget: PM favours FM over Montek on plan expenditure

Is Montek slowly losing his tag as the PM’s most trusted advisor to Chidambaram?

The tug of war over expenditure cuts for various government ministries between Finance Minister P Chidambaram and Planning Commission chief Montek Singh Ahluwalia has finally come to an end with Prime Minister Manmohan Singh approving a controlled gross budgetary support for plan expenditure in the “responsible budget” for 2013-14.

The plan expenditure, or GBS (gross budgetary support), is the government spending on social sector schemes such as Bharat Nirman, rural employment guarantee and National Rural Health Mission.

According to a report in the Business Standard, the PM has advised the commission to bring down its demand of a 12 percent increase in the GBS to Rs 5.83 lakh crore for 2013-14. According to media reports, the finance ministry favours a meagre increase of around 5 percent in the Plan expenditure for next fiscal over budget estimate of the current financial year.

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But a five percent increase in the GBS would mean that the finance ministry will provide only Rs 26,051 crore additional for the centrally-sponsored schemes in the upcoming budget, which will amount to a total of Rs 5,47,051 crore in 2013-14.

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The 12th Five Year Plan (2012-17) has envisaged total GBS of Rs 35.68 lakh crore during the five year policy period as compared to Rs 15.89 lakh crore realised in the 11th Plan (2007-12) at current prices.

On numerous occasions, the finance ministry made it clear to the Planning Commission, which allocates money to different ministries, that the GBS increase in the past few years was arbitrary and it was time for a correction. However, being unable to resolve the issue, the Prime Minister was forced to intervene and back Chidambaram to help him reign in the fiscal deficit.