Business Today

Govt goes on austerity drive, cuts non-plan spending

After the economy grew at its slowest pace in nine years in the January-March period, the government banned the creation of new posts and holding of its meetings in five-star hotels, among other measures, aimed at cutting non-Plan expenditure by 10 per cent.

twitter-logoPTI | May 31, 2012 | Updated 22:47 IST

Faced with the worst economic performance in nine years, the Indian government on Thursday 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 macro economic 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 government 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 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.

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