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  3. Govt announces austerity measures to cut fiscal deficit

Govt announces austerity measures to cut fiscal deficit

31 Oct 2014 Evaluate

With an aim to trim the fiscal deficit to 4.1 per cent of gross domestic product (GDP) in FY15, the government has issued new austerity measures including 10 per cent cut in non-Plan expenditure and ban on creation of new posts. Keeping in mind lower revenue realisation till date, the government also decided to barred senior officials from first-class air travel, foreign jaunts, holding meetings in five-star hotels and purchase of new cars.

A memorandum issued by Expenditure Department of the Finance Ministry noted that during the current fiscal, 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. The government highlighted that there is a need to continue to rationalise expenditure and optimise available resources and these measures will help to check fiscal deficit without restricting the operational efficiency of the various government’s departments.

These measures have been announced after considering the low growth in indirect tax collection at 5.8 per cent during first six months of the current fiscal against the budgeted target of 25.8 per cent. Tax is main source of revenue for the government. Meanwhile, it is expected that government's latest austerity drive would lead to a saving of up to Rs 40,000 crore or 0.3 per cent of the Gross Domestic Product (GDP).  India's fiscal deficit during the FY14 narrowed to $86.08 billion or 4.5% of GDP as compared to 4.89% during the FY13.

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