BUSINESS

“Austerity drive to contain fiscal deficit”

Union Finance Minister Pranab Mukherjee on Tuesday said his austerity drive circular asking ministries and departments to cut foreign tours and not host conferences in five-star hotels was aimed at reducing “wasteful expenditure” and containing the fiscal deficit.

Briefing the media at a Nabard (National Bank for Agriculture and Development) function here, Mr. Mukherjee said: “I sent a note [on austerity in government departments] and the Prime Minister has approved in certain areas where I considered that wasteful expenditure should be avoided and that money should be deployed for developmental work.”

Mr. Mukherjee said that even as there was no concern over the revenue collection front, the government's subsidy bill on crude oil could go up if international prices continued to rule high and spending on food and fertilizer might also be higher by way of subsidies.

“[So] I shall have to keep the target of the fiscal deficit...but surely I am interested in having some austerity measures to avoid the wasteful expenditure, but not productive expenditure,” he said.

In a note to various ministries and departments on Monday, the Finance Ministry advised restriction on foreign travel unless deemed absolutely necessary, refrain from holding meetings in five-star hotels, and not purchase new vehicles as also create new posts so as to cut back on expenditure.

For the current fiscal, the government has proposed to keep the fiscal deficit at 4.6 per cent of the GDP (Gross Domestic Product), down from 4.7 per cent in 2010-11.

Alongside, while the expenditure on fuel and fertilizer subsidies work out to about Rs.73,637 crore in a full year, the spending on food subsidy is pegged at Rs.82,000 crore, this fiscal and the total outgo may increase to Rs.95,000 crore when measures under the National Food Security Act are implemented.

Queering the pitch further is the revenue forgone on account of the cuts in duty on petroleum products to the extent of about Rs.36,000 crore during the current fiscal. On the other hand, the possibility of mopping up Rs.40,000 crore, as budgeted, from sale of equity in public sector undertakings (PSUs) also appear remote, going by the extreme volatility and downtrend in stock markets.

As for the government's borrowings programme, Mr. Mukherjee said the target will not be exceeded and there would be enough credit available in the market for the private sector.



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