The Plan expenditure for the next fiscal has been finalised at Rs 1,72,500 crore (Rs 1725 billion), 18.5 per cent more than the Rs 1,45,600 crore (Rs 1456 billion) gross budgetary support for 2004-05.

The figure is, however, significantly lower than Rs 1,95,000 crore (Rs 1950 billion), the amount the Planning Commission had said was required to enable the government to meet its public investment requirements to step up economic growth and also commitments made in the National Common Minimum Programme.

This reduced Plan size means central ministries will get around Rs 1,10,000 crore (Rs 1100 billion) in 2005-06 against their initial demand of Rs 1,74,000 crore (Rs 1740 billion).

The Planning Commission had pruned this amount to Rs 1,25,000 crore (Rs 1250 billion). A number of social sector ministries, including those of rural development, agriculture, water resources and health and family welfare, are protesting the cuts.

Given the late finalisation of the GBS, the Planning Commission has earmarked amounts, which are to go to special projects -- mostly related to the NCMP -- leaving the balance amount to be allotted by the ministries for different programmes.

As per the recommendations of the 12th Finance Commission, states are to be given the option of taking the loan component of central assistance or borrowing the amount from the market.

An amount of Rs 29,000 crore (Rs 290 billion) has been earmarked for the purpose. With annual Plan discussions for most states already completed, they are expected to take the monies from the Centre in 2005-06.

The government turned down a request for a significant hike in the GBS saying it would lead to a higher deficit in the next fiscal. The fiscal deficit target for 2005-06 is 4.1 per cent of the gross domestic product.

The government is committed to reducing its revenue deficit by 0.5 per cent and the fiscal deficit by 0.3 per cent each year under the Fiscal Responsibility and Budget Management Act.

Plan shortfall

• The Plan expenditure outlay is 18.5% more than the Rs 1,45,600 crore gross budgetary support for 2004-05.
• The Plan panel had sought Rs 1,95,000 crore GBS
• The central ministries will now get around Rs 1,10,000 crore against their initial demand of Rs 1,74,000 crore
• Ministries are protesting against the Plan cuts
• The government scaled down the GBS demand saying it would fuel fiscal deficit