New Delhi Extraordinary circumstances call for extraordinary solutions. To combat the slowdown that will hit the economy hard in the first half of the next fiscal, the interim budget for 2009-10 will set aside Rs 55,000 crore that will, perhaps for the first time in budgeting history, remain unallocated. The interim budget will be presented on Monday.

A senior finance ministry official told 'The Indian Express' this mechanism would ensure funds can flow quickly to sectors that run into unexpected difficulty as a result of the global financial crisis. “The government need not wait for parliamentary approval to allocate funds for such sectors. Timely intervention is crucial to mitigate the impact of the worsening external environment,” the official said.

Further, with general elections in April-May, the focus of the political class will shift from the economy to campaigning. “The government and parties will get busy in poll preparations. But the economy will need close monitoring and quick decisions. An automatic mechanism to keep the wheels oiled is a must,” the official explained.

Prime Minister Manmohan Singh approved the interim budget and cleared Finance Minister Pranab Mukherjee’s speech today. Mukherjee met Singh to discuss the key proposals.

Another official said allocations to ministries, or the gross budgetary support, would be restricted to Rs 2,85,000 crore. Actual provisioning would, however, be higher by Rs 55,000 crore at Rs 3,40,000 crore. This will adversely impact fiscal deficit, but government managers have told the finance ministry that a temporary relaxation to the targets set under the Fiscal Responsibility and Budget Management Act is better than living through a prolonged slowdown.

It will also add to the confidence of implementing agencies. They can claim funds from the “unallocated corpus” and accelerate the implementation process of various welfare programmes. “We need to keep both central ministries and states in top gear if we want to ensure that the global meltdown has minimum impact on India,” said the official.

The government will allow the fiscal deficit of states to go up to 3.5 per cent of the gross state domestic product (GSDP). This will help them cumulatively borrow an additional Rs 30,000 crore, and do their bit to stimulate the economy. This provision is already available in the current fiscal; the interim budget is likely to extend it for a year.

Infrastructure will continue to get the government’s attention. The India Infrastructure Finance Company Ltd will receive additional support to help strengthen its refinance capability. Exports that are amongst the worst hit, are expected to get a host of incentives for the whole of the next fiscal.