Subsidy : The Problem for the Centre

Huge subsidy burden has created a hole in the pocket of the government. With the divestment plan not going as per schedule, financial resources of the Centre are further getting strained. In such an environment, the only way to avoid worsening deficit is to cut expenditures. As such, the government has decided to raise the plan outlay for FY2013-14 by just 5%. The plan expenditure for the next fiscal year is pegged at Rs 5.5 trillion compared to Rs 5.2 trillion for this fiscal.

It may be noted that FY2013-14 will be the second year of the 12th five year plan. And in that year, let's assume that the plan expenditure registers just a modest increase of 5% as predicted. If that happens then the overall projections for expenditure in the 12th plan could go for a toss. It may be noted that the 11th plan had witnessed plan expenditure of Rs 15.9 trillion. And in the 12th plan the expenditure is expected to more than double to Rs 35.7 trillion. Thus, any slowdown in spend in the initial years will make the target difficult to achieve.