With the Centre’s tax mop-up falling short of the target, the Finance Ministry has come out with fresh set of austerity measures, including a 10 per cent cut in non-Plan expenditure and a ban on creation of new posts. The measures come into effect immediately.
The erstwhile UPA regime had also announced similar measures. However, no disclosures were made on the amount that will be saved by this move.
The measures are aimed at promoting fiscal discipline without restricting the operational efficiency of the Government, said an office memorandum issued by the Expenditure Department in the Finance Ministry.
“In the context of the current fiscal situation, there is a need to continue to rationalise expenditure and optimise available resources,” it said adding that, “For 2014-15, every Ministry/department shall effect a mandatory 10 per cent cut in non-Plan expenditure, excluding interest payment, repayment of debt, defence capital, salaries, pension, and Finance Commission grants to the States.”
According to Budget documents, total non-Plan expenditure is estimated at ₹1 lakh crore every month. Back-of-the-envelope calculations show that the exempted categories mentioned in the order account for nearly 70 per cent of this expenditure. In the remaining five months of this fiscal year, the Centre can save approximately ₹15,000 crore.
Government officials have been barred from travelling first class.
“While officers are entitled to various classes of air travel depending on seniority, utmost economy would need to be observed while exercising the choice keeping the limitations of the Budget in mind. However, there will be no bookings in First Class,” said the memorandum.
It has also advised that in all air travel, the cheapest tickets available for the entitled class are to be purchased. Companions cannot travel free on either the domestic or international circuit.
The memorandum also pushes for effective use of facilities for video conferencing.
The Centre has also banned creation of Plan and non-Plan posts. At the same time, posts that have remained vacant for more than a year will not be revived except under very rare and unavoidable circumstances and after seeking clearance from the Expenditure Department.
These measures have been announced after indirect tax collection grew only 5.8 per cent during the first half of the current fiscal year against the Budget target of 25.8 per cent.
While gross direct tax collection grew 15 per cent, in line with the Budget target, net collection (gross collection minus refund) is up a mere 7 per cent.
On non-tax revenue, the good news is that lower crude oil prices and deregulation of diesel prices are expected to have a positive impact on the subsidy payout.
The Centre aims to restrict the fiscal deficit to 4.1 per cent of the GDP in the current fiscal. However, the fiscal deficit, which is the difference between Government earning and expenditure, has already shot up to 75 per cent of the Budget estimate in the first five months (April-August) of the current fiscal year.