Govt launches austerity measures; no new jobs for a year

Aiming to restrict the fiscal deficit to 4.8 percent of GDP in 2013-14, the Finance Ministry has ordered all ministries and departments not to buy new vehicles, create new jobs or fill posts lying vacant for over one year.

Updated: Sep 19, 2013, 08:43 AM IST

New Delhi: Government departments have been banned from holding meetings in 5-star hotels and officials barred from executive class air travel as part of a slew of austerity measures announced Wednesday to cut non-plan expenditure by 10 percent.

Aiming to restrict the fiscal deficit to 4.8 percent of GDP in 2013-14, the Finance Ministry has ordered all ministries and departments not to buy new vehicles, create new jobs or fill posts lying vacant for over one year.

It has also directed that the size of delegations going abroad should be kept at "absolute minimum."

The government has been introducing austerity measures since 2008-09, most recently in November 2012.

"Such measures are intended at promoting fiscal discipline, without restricting the operational efficiency of the government. In the context of the current fiscal situation, there is a need to continue to rationalise expenditure and optimise available resources," the Finance Ministry said.

Finance Minister P Chidambaram earlier said he had drawn a red line and would not allow the fiscal deficit to breach the target of 4.8 percent of GDP in 2013-14.

The various austerity measures helped the government to contain the fiscal deficit at 4.9 percent of GDP in the previous financial year, against the budgeted target of 5.1 percent.

The circular came a day after Chidambaram met Financial Advisors of various ministries to impress upon them the need for austerity.

The Finance Ministry said the austerity measures would also apply to autonomous bodies such as the All India Institute of Medical Sciences and All India Radio, adding that no fresh commitments would be made over and above what was provided in the Budget.

The ministry, however, did not provide any estimate of savings on account of the austerity measures.

The Finance Ministry said that the "mandatory 10 percent cut" in plan expenditure will exclude interest payments, repayment of debt, defence, capital, salaries, pensions and grants to the state.

"No re-appropriation of funds to augment the non-plan heads of expenditure on which cuts have been imposed, shall be allowed during the current fiscal," it said.

Referring to jobs in government departments, it said there will be a total ban on new posts and those that have remained vacant for more than a year will not be filled except under very rare and unavoidable circumstances.

Only seminars and conferences that are absolutely essential should be organised, it said, adding that "holding of exhibitions/seminars/conferences abroad is strongly discouraged except in case of exhibitions for trade promotions."

It said meetings and conferences in 5-star hotels would be banned and also the purchase of vehicles, except to replace condemned vehicles.

"All officers are to travel in economy class only for domestic travel, except officers in the apex scale who may travel in executive class," it said, adding the restriction will not apply for international travel.

The Secretary of each ministry and department would have to ensure that foreign travel is "restricted to most necessary and unavoidable official engagements based on functional necessity...The size of delegation and the duration of visit will be kept to the absolute minimum."

The Finance Ministry asked the departments to avoid bunching up expenditure in the last quarter to ensure that there is no infructuous or wasteful spending.

It said the Secretaries would be responsible to ensure compliance of the austerity measures and the Financial Advisors would be required to submit reports to the Finance Ministry on a quarterly basis.

The total expenditure for the current fiscal has been budgeted at Rs 16.65 lakh crore, of which non-plan expenditure has been estimated Rs 11.09 lakh crore.

For the 2012-13 fiscal, non-plan expenditure was estimated at Rs 9,69,900 crore, while actual spending was higher at Rs 9,95,139 crore.

The major increase in non-plan expenditure over the 2012-13 budget estimates arose from the additional requirement on account of subsidies, a Finance Ministry document said.

However, the government was able to limit the plan expenditure to Rs 4,14,283 crore during 2012-13, down Rs 1,06,742 crore from the budget estimate.

The shortfall in plan expenditure was part of the government drive to contain the fiscal deficit, the document added.