B S Raghavan

Root-and-branch expenditure reform

B.S. RAGHAVAN | Updated on July 12, 2012

There have from time to time been noises emanating from the side of the Government about imposing austerity measures as a means of curtailing runaway expenditure and bringing fiscal deficit within the statutory limit. Austerity was once again the mantra invoked by the former Finance Minister, Mr Pranab Mukherjee, to counter the record lows the rupee had been hitting in relation to the dollar.

There have been umpteen number of announcements of such measures ever since Independence. The same template is used again and again: An across-the-board 10 per cent cut in expenditure; flying by economy class for top brass; curbs on expenditure on entertainment; avoidance of ostentation in official functions; and the like.

As a response to financial stringency, they have become so stale and routine that they are not taken seriously by the Government departments themselves. Nor do they have any impact on the outgo either. In fact, there has never been an occasion in the past when, following the announcement of austerity measures, the Government has explicitly taken the people into confidence on the amounts saved. In short, they have become an eyewash and a gimmick.


What is needed is not just superficial tinkering, but a bold and sweeping expenditure reform. It would mean the Government summoning the needed will and determination to institute systems and safeguards with a view to putting a stop to the drain on public exchequer.

The Fifth Finance Commission, while making generous increases in the emoluments of government staff, had laid down three preconditions for their sanction by the Government. The first was the formulation and enforcement of criteria to measure the performance of different categories of staff from the top to the bottom.

Such criteria from typists upward, contained in what was famous as the Chapman Report, were in vogue in all Government offices in India during the British rule. The retention of, or addition to, the existing staff was strictly based on the application of those yardsticks. There has been no such exercise undertaken after Independence, with the result that there has been a bloating of establishments everywhere.

The second was the drawing up of a programme to retrench in a phased manner whatever staff was found surplus as per the performance yardsticks. And the third was carrying out a thorough review of the existing Ministries and departments so as to do away with those that overlap or have outlived their purpose.

Of these, only the last was taken up by the NDA Government under Atal Behari Vajpayee as the Prime Minister with the appointment of the K. P. Geethakrishnan Commission. It duly submitted its report which, apparently, was found to be a hot potato and dumped.

These three measures are still valid and, if implemented, will lead to sizeable savings.

In addition, elimination, or at least, phased reduction, of perks and concessions such as special pay and passes to railway, airlines and defence employees will undoubtedly buttress the Government’s finances to a significant extent. It is ironical that while there is a hue-and-cry against subsidies to the disadvantaged sections of the population, well-paid and well-heeled government officials should insist on clinging to outdated and unwarranted privileges.


For instance, railway passes date back to the times in the 19th century when railway projects were being put through in inaccessible places covered by jungles and wild animals, and have no relevance now. Out of the External Affairs Ministry’s total budget (2011-12) of Rs 7106 crore, Rs 2565 crore or 36 per cent is made up of Rs 1365 crore on Embassies and Missions and Rs 1200 crore on special diplomatic “discretionary” expenditure.

Why should the Government, in this age of information and communications revolution, maintain white elephants and that too, in countries which are non-descript and of no earthly consequence to India, and especially when almost all of them are notorious for being of no help to Indians going abroad?

If my close personal observation some years ago of the working of the Washington and Rome Embassies is any guide, most of the personnel from the Ambassador downwards are most of the time idling away their time or attending some diplomatic party or the other, without any solid contribution to their credit.

The Embassies can be cut to one-fourth their present number, yielding a whopping addition of Rs 2500 crore to public coffers.

Published on July 12, 2012

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