Austerity measures likely to help government save Rs 1,000 crore

The austerity measures announced by finance minister Pranab Mukherjee are likely to help the government save between Rs 800 crore and Rs 1,000 crore, said a senior finance ministry official. The government has decided to cut down on foreign travels of ministers and official delegations and has put a ban on creation of plan and non-plan posts The figure is based on preliminary estimates. 

In addition, the 10% cut on non-plan expenditure is likely to save the government more than Rs 50,000 crore. The gains may help the government borrow less and meet its fiscal deficit target, sources said. In the last fiscal, the government's fiscal deficit was 5.7% of the GDP on account of lower revenue realization and higher expenditure on subsidies. This year the government has announced to limit its subsidies to 2% of the GDP, which FM has said is very much achievable with reduction in expenditure and higher revenue expected this year. 

Directive to all ministries to release funds only against receipt of utilization certificates can make some difference. It may lower the amount of funds released under government's plan outlay and may give some relief on borrowings estimated at Rs 4.8 lakh crore for the current fiscal. The total expenditure for 2012-13 is budgeted at Rs 14.9 lakh crore. Of this, the plan expenditure is Rs 5.2 lakh crore and non-plan expenditure is Rs 9.7 lakh crore. 

The directive to all ministries and departments to effect a mandatory 10% cut in non-plan expenditure excludes interest payment, repayment of debt, defence capital, salaries, pension and the finance commission grants to states. The FM has also advised ministries to strictly comply with the guidelines on the cap on expenditure in the last quarter of the fiscal and not to rush with expenditure on procurement, particularly in the last month of the year. 

Government accounts for 2010-11 shows at least eight departments had spent between 40% and 65% of their total outlay in the last month of the fiscal. Interestingly, two government departments incurred expenditure of 60% of their total outlay on March 31, raising questions on the quality of expenditure and if they were spent for the purpose outlined in the Budget. The finance ministry's guidelines stipulate that all ministries should restrict their expenditure during the last quarter of the financial year to 33% and during March to 15% of the allocated budget. 

Source:- The Economic Times