Finance minister Arun Jaitley stuck to a well-worn UPA template of trimming government expenditure on seminars and conferences, purchase of vehicles and domestic and overseas travel by officials even as he ordered a 10 per cent mandatory cut in non-plan expenditure which has been budgeted at a little over Rs 12 lakh crore this financial year.
But the effort carried more style than substance as it left out the bulk of non-plan expenditure: interest and debt payments, defence spending, pensions and grants to states.
The saving from the latest austerity drive will be small at about 2 to 2.3 per cent of the budgeted spending.
Japanese brokerage Nomura put out a quick estimate of the saving: Rs 40,000 crore, roughly 0.3 per cent of the GDP.
The Jaitley directive said the government would not create any new jobs, and virtually ban purchase of new cars except by defence and security agencies, and directed officials to use video conferencing facilities instead of flitting around the country.
“The measures are intended to promote fiscal discipline, without restricting the operational efficiency of the government,” said expenditure secretary Ratan P. Watal who is doubling as interim finance secretary.
The measures are virtually the same as the initiatives taken in the past by UPA finance ministers Pranab Mukherjee and P. Chidambaram — and even copied the wording of earlier directives.
“The only difference over the years has been the name of the man who signs it,” said retired joint secretary Surojit Roy.
The austerity drives in the past have had little impact on government expenditure.
The Reserve Bank of India noted this year that non-plan spending overshot the budget estimates in 2013-14 because the government had to wrestle with a ballooning subsidies bill that leapt 11 per cent to Rs 2.45 lakh crore.
The subsidy on food, fertilisers and petroleum has been capped this year at Rs 2.51 lakh crore and Jaitley will certainly hope to meet the target after the deregulation of diesel earlier this month.
Global crude prices have also been falling this year that could put a lid on petroleum imports, which account for more than 80 per cent of India’s requirements.
Jaitley took on a huge burden when he gamely accepted the UPA government’s challenge of capping fiscal deficit at 4.1 per cent of the GDP — a target that former finance minister P. Chidambaram had set out in the interim budget. Fiscal deficit — the gap between expenditure and earnings — stood at 4.5 per cent in 2013-14.
In August this year, fiscal deficit stood at 75 per cent of the full year’s target of Rs 5.28 lakh crore. Total expenditure stood at 38 per cent of the budget estimate while tax revenues lagged at 19 per cent — which could put a crinkle in the government’s finances.
The big worry is over economic recovery with industrial output growing by a measly 0.4 per cent in August — not sufficient to fire the engines of the economy.
Jaitley, however, remains upbeat about the recovery. “Certain sectors like services are doing well; others like manufacturing are gradually picking up,” the finance minister told top income tax officers at a seminar today.
The finance ministry put out a note saying the government was expecting to see an industrial resurgence in the third and fourth quarters.
Prime Minister Narendra Modi has tried to drum up investment with strong roadshows in Japan and the US earlier this year and plugging a Make in India campaign that has been underpinned by a set of measures designed to ease the pain of doing business in India.
But it’s still a long way to go. India was ranked 142 out of 189 countries in the World Bank’s closely watched Ease of Doing Business Survey, below Pakistan and Bangladesh that were ranked 129 and 130 respectively.
- The Telegraph, Calcutta