Centre to cut costs as part of austerity drive to keep fiscal deficit under control

New Delhi: With its focus on keeping the fiscal deficit under a tight leash, the Centre on Thursday announced a slew of austerity measures, which include banning first class air travel for bureaucrats, all meetings in five-star hotels and the purchase of cars. It also freezes new appointments in Central government.

It is learnt the austerity measures are aimed at trimming non-Plan expenditure by 10 per cent, which will lead to a reduction in the fiscal deficit to a seven-year low of 4.1 per cent of GDP.

“Such steps are intended at promoting fiscal discipline, without restricting operational efficiency of the Centre,” a finance ministry statement said.

“In the current fiscal situation, there is a need to rationalise expenditure,” it added.

The UPA government had imposed austerity measures in 2012 and 2013 to cut down on the deficit.

The creation of new posts as well as car purchases are mostly banned and video conferencing should be used wherever possible.

The finance ministry further said that with these measures in place, there will be no impact on interest and debt payments, the defence budget, salaries and pensions.

The ministry said: “While officers are entitled to various classes of air travel depending on seniority, the utmost economy would need to be observed while exercising the choice keeping the limitations of budget in mind. There will be no bookings in first class.”

The finance ministry said the purchase of new vehicles to meet the operational requirement of the defence forces, paramilitary units and security outfits are permitted, but the ban on purchase of any other vehicles will continue.

“In the context of the current fiscal situation, there is a need to continue to rationalise expenditure and optimise available resources,” it said.

The government proposes to lower the fiscal deficit to three per cent of GDP by 2016-17. The deficit, which had touched a high of 5.7 per cent in 2011-12, was brought down to 4.8 per cent in 2012-13 and further to 4.5 per cent in 2013-14 by way of austerity measures.

“The task before me is very challenging because we need to revive growth, particularly in manufacturing sector and infrastructure,” finance minister Arun Jaitley had said in his Budget speech. A choice has to be made on whether or not to be victims of mere populism and wasteful expenditure, he said.

The finance ministry said the “mandatory 10 per cent cut” in plan expenditure will exclude interest payments, repayment of debt, defence, capital, salaries, pensions and grants to states. “No reappropriation of funds to augment non-Plan heads of expenditure on which cuts have been imposed shall be allowed during the current fiscal,” it said.

It said the austerity measures will apply to autonomous bodies, adding no fresh commitments will be made over and above what was provided in the Budget.

For the current fiscal (2014-15), the government has proposed Plan expenditure of '5.75 lakh crores, while for non-Plan expenditure is over Rs 12.19 lakh crores. The total budgeted expenditure estimates, including Plan and non-Plan, stand at Rs 17,94,892 crores, higher than revised estimates for 2013-14 at Rs 15,90,434 crores.