SUPPLEMENTARY GRANT

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Context: The Union Government is likely to increase funding for the "three Fs" - fertilizer, food, and fuel subsidies - as well as the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGA) in the upcoming Supplementary Demands for Grants (SDG).

Details

• Supplementary Demands for Grants (SDG) are requests presented to Parliament for additional funds beyond the initially allocated budget for a financial year.
• These demands may cater to various needs, including subsidies for fertilisers, food, and fuel, as well as support for schemes like the Rural Employment Guarantee.

Types of Demands in SDG

• Token Demands: Symbolic amounts (e.g., ₹1 lakh) allocated for specific purposes or schemes.
• Technical Demands: Reallocating savings from one department or ministry to fund another purpose or scheme.
• Substantive/Cash Demands: Requesting fresh allocations, beyond the budget, requiring withdrawals from the Consolidated Fund of India.

Financial Landscape

• By the halfway point of the fiscal year 2023-24, a significant portion of the budget (over 47%) has been expended.
• Notable expenditures include increased capital spending, but specific areas like Nutrient-Based Fertiliser Subsidy and Urea Subsidy have already reached high percentages.

Anticipated Additional Expenditure and Allocations

• The Cabinet has approved additional spending exceeding ₹22,000 crore, likely to be provided through the SDG.
• Subsidies, particularly in the petroleum sector for schemes like Ujjwala LPG, might require more funding due to increased connections and additional subsidies for customers.

Specific Sectors and Scheme Demands

• Fuel Subsidies: Demand for more funds due to potential overshooting of the originally budgeted petroleum subsidy.
• Food Grains Scheme: Expectation of additional allocation for the free food grains scheme.
• Rural Employment Guarantee: Growing demand for funds for the Mahatma Gandhi National Rural Employment Guarantee Scheme, with a shortfall despite previous allocations.

Budget Impact and Fiscal Deficit

• Despite these anticipated additional allocations, efforts are made to avoid significant fresh cash outflow to prevent adverse effects on the estimated fiscal deficit of 5.9% of the GDP.

Supplementary Grants ●Supplementary Grants are the additional grants necessary to satisfy the government's mandatory spending. ●Any plan or estimate seeking money from the Consolidated Fund of India must be given to the Lok Sabha in the form of a demand for grants, according to Article 113 of the Constitution. ●When grants, authorised by the Parliament, fall short of the required expenditure, an estimate is presented before the Parliament for Supplementary or Additional grants. These grants are presented and passed by the Parliament before the end of the financial year (1st April to 31st March). ●They enable the government to adjust its spending according to the changing economic situation and priorities. For instance, in the wake of the Covid-19 pandemic, the government had to increase its expenditure on health, social welfare and economic stimulus measures. This necessitated Supplementary Grants to cover the additional spending. ●Supplementary Grants also have some drawbacks. They increase the fiscal deficit and public debt of the country, which may have adverse effects on macroeconomic stability and growth. They also reduce the transparency and accountability of the budgetary process, as they are often passed without much scrutiny or debate by the Parliament.

Conclusion

• Supplementary Grants are a crucial tool for fiscal management in India, but they should be used judiciously and sparingly. The government should try to avoid excessive or frequent Supplementary Grants by improving its budgetary forecasting and execution. The Parliament should also exercise its oversight function and ensure that Supplementary Grants are justified and necessary.

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Types of Grant: https://www.iasgyan.in/daily-current-affairs/types-of-grant

PRACTICE QUESTION Q. How does the Parliament in India exercise its authority to regulate and oversee the financial economy, and what key measures does it employ to ensure effective financial governance within the country?