Centre orders austerity drive, asks babus, states to watch expenditure

Buffeted by the spectre of rising prices and a lower-than-estimated tax revenue collection, the government on Monday ordered a long list of austerity measures, including a complete ban on creation of new posts in all ministries and departments, barring new organisations. HT reports. Austerity measures

Buffeted by the spectre of rising prices and a lower-than-estimated tax revenue collection, the government on Monday ordered a long list of austerity measures, including a complete ban on creation of new posts in all ministries and departments, barring new organisations.In a late evening memorandum, the finance ministry asked the ministries to ban holding of meetings and conferences at five star hotels and stop purchase of new vehicles, except for the defence ministry and security forces.

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The government's concern over expenditure stems from the realisation that the indirect tax revenue collection target of Rs 3.92 lakh crore, about 15% higher this year, may not be met as the rising input costs and costlier borrowing hurt corporate profitability, forcing them to defer planned investments amid signs of an industrial slowdown.

India's gross domestic product grew by 7.8% during January to March, the slowest pace in five quarters. The manufacturing sector grew by a slow 5.5% in the quarter, as rising interest rates hurt consumption and investment.

This will hurt growth as corporations defer planned investments and look for ways to cut costs. All departments have been asked to ensure that foreign travels of officials are "restricted to most necessary". The memorandum, signed by expenditure secretary Sumit Bose, said participation in study tours or conferences abroad at government cost would not be entertained.

State governments have also been asked to furnish monthly returns of expenditure along with a report on utilisation of funds before further central funds are released.