The Hindu Business Line : Austerity overdrive

After all the public disagreements between ministries and the Finance Minister on adherence to fiscal prudence targets for the year, North Block will have its way if a recent note it has circulated to various ministries is any indication. To keep the fiscal deficit well in line with the current year target of less than 4 per cent of GDP, the Finance Ministry has issued an advisory to ministries to prune expenditure according to a game-plan it has made to snip close to 5 per cent or Rs 7,500 crore of government expenditure.

All non-Plan expenditures, barring interest payments, Defence spending, pension and the Twelfth Finance Commission grants to States, will have to be curtailed. In a proactive move, the Finance Ministry will also reject any demand for increases in non-Plan expenditures by ministries. It has also capped foreign travel by government officials to four every year, in itself quite generous, considering that officials can travel on business every quarter. It would have perhaps been equally apposite to curtail the number of domestic flights that ministers and MPs take on government account both during and between Parliament sessions. After all, the national carriers have to foot the bill; they also stand to lose commercial travellers. And the taxpayer has to bear the burden of bureaucrats or people's representatives flying across the country at the drop of a hat. Although the Fiscal Responsibility and Budget Management Act and the deficit target have been mandated by Parliament, which means that all parties have to help in meeting targets, austerity almost sounds like a dirty word in a country just moving into prosperity. The Finance Ministry may perhaps have felt too draconian in its demand for curtailing foreign travel so a small loophole allows ministers and officials the leeway for more than the fixed number of travel if they submit a programme well in advance.

Unfortunately, the Finance Ministry does not address the more substantive problem of hidden or disguised leakages in spends occurring under the aegis of Plan programmes. It is indeed a sad reflection on financial governance that zero-based budgeting has yet to catch on and that the Eleventh Plan document has to remind ministries of its need. Some years ago, the Controller and Auditor General had noted a dismal adherence to "Utilisation Certificates" that were to be submitted by ministries to that body about the way money allotted to them had been spent. The idea of zero-based budgeting was meant to be an improvement but it is distressing that after years of discussion on its need, it has not firmly entrenched itself at the Centre despite its success in some southern States. Fiscal prudence requires more than just one ministry concerned about its urgency.