Government tightens belt; launches austerity drive

Glittery nights and classy flights will now become a dream for bureaucrats as government on Wednesday launched austerity drive.

The Finance Ministry announced some parochial austerity measures, which included ban on government seminars in 5-Star hotels, a purchase of new vehicles and a cut in non-plan expenditure by 10 percent.

The 10 percent cut will not include interest payment, repayment of debt, defence budget, salaries and the pension bill.

Moreover, government officials, excluding top bureaucrats, have been directed to fly only in economy class for domestic tours.

The measures also incorporate an absolute ban on new appointments in government departments.

The measures were declared to enhance the slowing economy without obstructing the functioning efficiency of the government.

The UPA government cannot pronounce any new common man friendly schemes in light of the 2014 general elections and even the state governments, despite of their political character, will find it difficult to get more central funds till the released amounts have been fully utilised.

With an austerity rule in full sway in India, efforts are being made to trim the national deficit – which falls short by some margin.

The deficit in the first four months had reached a disturbing level of 63 percent of the full-year target. Pushed to meet the fiscal deficit target of 4.8 percent of the gross domestic product (GDP), the finance ministry gave open orders to all federal ministries to firmly follow the rule that not more than 33 percent of the Budget Estimate (BE) is spent in the last quarter of the fiscal, while the expenses in March, the last month of the fiscal, should not be more than 15 percent of the BE.

It was reported in April this year that the sleuths of National Investigation Agency were facing an odd problem of transportation as they are ‘forced’ to commute by taxis, since the investigating agency had not been able to purchase vehicles due to an austerity drive.

Experts hailed the measures taken by the ministry, saying these would help evade a sovereign rating downgrade but simultaneously accepted that these spending restrains could have a negative impact on growth, given that private expenditure has hit a nadir and corporate investments have barely improved.

According to a finance ministry’s release, every ministry will put into effect a compulsory 10 percent cut in non-Plan expenditure, which means that near to a half of the budgeted non-Plan expenditure of Rs 11.09 lakh crore for financial year 2014 would be subject to the cut.

Reportedly, subsidies are expected to be kept within the budgeted limits, credit goes to the gradual deregulation of fuel prices and no major extra burden on food subsidy is seen this fiscal in view of the Food Security Law.

However, my only question is that with the economy in deep trouble will the government’s austerity drive work or is it just an election gimmick ahead of 2014 general elections?

Because this is not the first time that the government has launched austerity drive, such measures have been announced many times, but it isn’t that easy to implement them as ministers and bureaucrats say their positions require them to live in style.