Pranab8217;s 8216;austerity8217; drive old hat?

Read Report FMs austerity drive: no meetings in five-star hotels,limited foreign travel

Also on the cards is pruning of allocations made to various schemes,where spending will be insisted on current outlay before asking for additional money.

8220;The austerity drive would be divided into two parts. First there would be a cut in establishment expenses,and then there could be some cut in the scheme wise expenses as well,8221; official sources said.

With finances under stress,Finance Minister Pranab Mukherjee had announced on Wednesday in Parliament that government would resort to 8220;unpopular8221; austerity measures to deal with fiscal problems.

8220;8230; I am going to take a little bit of unpopular steps. I am going to issue some austerity measures8230;,8221; Mukherjee had said.

It is likely that the government would announce some curbs in foreign tours by ministers and officials as well as insistence on travel by economy class.

8220;A detailed plan has to be worked out for expenditure rationalisation,8221; the official said,adding that a decision on the scheme wise expenditure would be taken after consultation with various ministries.

In a bid to reduce wasteful expenditure and containing fiscal deficit,the government had last year cut foreign tours and and asked officials to refrain from hosting conferences in five-star hotels.

Besides,in 2009 in the wake of global economic slowdown the finance ministry had asked various ministries and departments to cut non-plan expenditure by 10 per cent.

Such expenditures included spending on publications,professional services,advertising and publicity,office expenses,petrol,oil,lubricants except for security related requirements and other administrative expenses.

At that time too ministers were made to travel economy class in domestic and international flights.

Anticipated fiscal deficit exceeding budget estimates by a huge margin,rising subsidy burden and slowing growth,has made the government take steps to rationalise expenditures to control its finances.

Fiscal deficit had ballooned to 5.9 per cent in 2011-12 and the government has budgeted to bring it down to 5.1 per cent in the current fiscal.

The government is targeting cutting the subsidy bill to below 2 per cent of GDP this fiscal and 1.75 per cent in the subsequent years.

Last fiscal,it had provided Rs 65,000 crore in fuel subsidy,which it hopes to trim to Rs 40,000 crore in 2012-13.

High subsidies are putting pressure on the fiscal deficit,which touched 5.9 per cent of the GDP in 2011-12 and is budgeted at 5.1 per cent in 2012-13.

While petrol prices were freed from government control in 2010,the government has to subsidise the oil marketing companies for selling diesel at prices lower than market determined rates.

After clocking a growth rate of 9 per cent for two consecutive fiscal 2009-10 and 2010-11,the economic growth slowed to 6.9 per cent in 2011-12. It is projected to grow by 7.6 per cent /-0.25 per cent in the current fiscal.

FMs austerity drive: no meetings in five-star hotels,limited foreign travel

ENS Economic Bureau : New Delhi,Tue Jul 12 2011,02:18 hrs

In a fresh set of austerity measures issued today,the Union Finance Ministry has stopped all departments from meeting or holding conferences in five-star hotels,banned purchase of new vehicles,put strict curbs on foreign travel and also prohibited creation of new posts.

It would be the responsibility of the secretary of each ministry/ department to ensure that foreign travel is restricted to most necessary and unavoidable official engagements based on functional necessity, said the directive issued today,just a day before the Cabinet reshuffle.

It said the steps were necessary to carry on the process of fiscal consolidation vigorously and to meet the fiscal and revenue deficit targets announced in the Budget for 2011-12.

The directive said that new vehicles can be bought only for operational requirements of defence and paramilitary forces and other organisations involved in security operations.

The ministry has also called for a ban on creation of Plan and non-Plan posts except for new organisations. Consultants should be engaged only for high quality services for which the concerned ministry/ department does not have requisite expertise.

Calling for greater accounting of funds,the ministry has said that no money should be released to any entity which has defaulted in furnishing utilisation certifications for grants-in-aid released by the central government without its prior approval.

The state governments are required to furnish monthly returns of Plan expenditure central,centrally-sponsored or state plan to respective ministries/ departments along with a report of amounts outstanding in their public account of central and centrally sponsored schemes, it said.

The ministries and departments have been asked to submit an overall report on compliance on a quarterly basis.

Meanwhile,public policy experts as well as government sources said the steps that were announced were unlikely to save the exchequer more than a few hundred crores of rupees.

Such austerity measures will serve little in reining in the fiscal deficit but are more symbolic in nature, said D K Srivastava,director,Madras School of Economics. The deficit for 2011-12 is estimated at 4.6 per cent of the GDP,but economists expect it to exceed 5 per cent.