Recently, the finance ministry has tabled the MTEF (Medium-Term Expenditure Framework) in the parliament.
What is MTEF?
The MTEF is an annual, rolling three year-expenditure planning.
It sets out the medium-term expenditure priorities and hard budget constraints against which sector plans can be developed and refined.
MTEF also contains outcome criteria for the purpose of performance monitoring.
MTEF together with the annual Budget Framework Paper provides the basis for annual budget planning.
What are the recent announcements in the MTEF?
Petroleum:The government expects to more than halve its petroleum subsidy bill over the next three years.
By March 2018, the target is to eliminate the LPG cylinder subsidy altogether, by raising prices by Rs.4 each month.
Efforts are also taken to bring kerosene subsidies under DBT system or making some States ‘kerosene-free.’
Food:The food subsidy bill is estimated to shoot up sharply from Rs.1.45 lakh crore this year to Rs.2 lakh crore by 2019-20.
One of the main reasons for an increase in food subsidy is to meet the repayment obligations of FCI to the National Small Savings Fund.
Infrastructure: Greater spending on defence, railways, road transport and urban development is proposed.
The finance ministry expects government’s cap to rise by 25% to RS.3.9 lakh crore by 2019-20.
Taxation: In the next two years, the government is betting on an expansion of the tax base, citing gains from GST and increased surveillance efforts post-demonetisation.
The tax-GDP ratios are projected to be 11.6% and 11.9%, in 2018-19 and 2019-20, respectively.
Interest rates:The government’s revenue expenditure are expected to rise nominally to Rs.6.15 lakh crore by 2019-20.
There will not be any ‘upward pressure on interest rates’ owing to borrowings.
