Govt of India launches austerity drive

Written by Agencies | New Delhi | Updated: Jun 1 2012, 02:38am hrs
Money crunchGovt bans meetings in 5-star hotels, curbs on foreign travel, non-Plan expenditure cut 10%. (Reuters)
Faced with the worst economic performance in nine years, the government today launched an austerity drive banning creation of new posts and holding of its meetings in five-star hotels besides restricting foreign travel by officials.

There will also be a ban on purchase of new vehicles, the Finance Ministry said in a direction to all ministries and departments.

These directives, aimed at cutting non-Plan expenditure by 10 per cent during the current fiscal, were announced on a day when the country's growth rate declined to nine-year low of 6.5 per cent in 2011-12 and rupee touched a new low of 56.51 to a dollar.

"There is tremendous pressure on government's resources, there is an urgent need for rationalisation of expenditure and optimisation of available resources with a view to improve macreoeconomic environment", the Ministry said.

Interestingly, the measures this time around do not include any direction on a travel by economy class. This issue had led to a controversial "cattle class" remark by the then Minister of State for External Affairs Shashi Tharoor in 2009.

The Centre will also observe discipline in fiscal transfers to state, public sector units and autonomous bodies.

"No amount shall be released to any entity (including state governments) which has defaulted in furnishing utilisation certificates for grants-in-aid released by the central government without prior approval of the Ministry of of Finance", it said.

However, directive to cut non-Plan expenditure by 10 per cent will exclude interest payment, defence purchases, salaries, pension and the grants to states.

The secretary in each department, it added, would be responsible for ensuring compliance of the austerity measures.

The memorandum said that "there will be a total ban on holding of meetings and conferences in five-star hotels... purchase of vehicles is banned until further orders".

On foreign travel, it said, the size of the delegation and the duration of the visit be kept to "absolute minimum".

It also said that holding of exhibitions, seminars and conferences abroad is "strongly discouraged".

The Finance Ministry further said that rush of expenditure on procurement should be avoided during the last quarter of the fiscal and, in particular, the last month of the year "so as to ensure that all procedures are complied with and there is no infructuous or wasteful expenditure".

Secretaries of the ministries and departments would be "fully charged" with the responsibility of ensuring compliance of the measures, the memorandum said.

The memorandum also listed some specific steps to be adopted, including that unspent balances available with states and implementation agencies must be taken into account before further release are made.

As regards to discipline in fiscal transfers to states, it said the state governments are required to furnish monthly returns of Plan expenditure in respect of central and centrally sponsored schemes.

"This requirement may be scrupulously enforced," the memorandum added

The Finance Ministry also made it clear that no fresh financial commitments should be made on items which are not provided for in the budget approved by Parliament.

Finance Minister Pranab Mukherjee had earlier said in the Rajya Sabha that his Ministry would come out with austerity measures to check fiscal deficit, which he proposed to bring down to 5.1 per cent of the GDP in the current fiscal from 5.76 per cent a year ago.

The measures on "fiscal prudence and economy" has come into force with immediate effect.