Cash-strapped govt cuts non-essential expenditures amid Covid-19 crisis

The Union government has resorted to cutting costs after the economy saw a sharp 23.9 percent contraction in the first quarter of 2020-21, mainly because the Covid-19 lockdown.

The government has decided to cut non-essential expenditures, such as expenses on celebrations, creation of new posts and appointment of consultants, to save scarce resources for priority sectors as country’s fiscal deficit has already crossed 103 percent of the budgeted estimated for the entire 2020-21.

The department of expenditure (DoE) issued an order on Friday asking all government departments and autonomous bodies to cut administrative expenses.(Getty Images/iStockphoto)

The department of expenditure (DoE) issued an order on Friday asking all government departments and autonomous bodies to cut administrative expenses. This is close on the heels of a similar order issued on Wednesday that banned the printing of diaries, calendars and coffee table books in physical forms.

“ln the context of the present fiscal situation and the consequent pressure on Government resources, there is a need for further economy and rationalization of non-priority expenditure, while protecting and preserving priority expenditure,” the DoE order said. The department is an arm of the Union finance ministry.

The Union government has resorted to cutting costs after the economy saw a sharp 23.9 percent contraction in the first quarter of 2020-21, mainly because a 68-day hard lockdown across the country to check the spread of Covid-19 pandemic.

The order prohibits the printing of books, publications and documents on imported paper, except for printing done abroad by the Indian missions. “Expenditure on functions such as celebrations of Foundation Day, etc. should be discouraged or if felt necessary be appropriately curtailed,” it said. Besides, it directed departments to avoid travel costs for such functions and distribution of bags or mementoes.

It asked ministries to review individual consultants working there and reduce their numbers to the minimum. Due economy may be observed while determining the fees of the consultants, which should not be disproportionate to the quality and quantity of work to be carried out by them, it said.

The government also banned creation of new posts, except with the approval of the DoE. “This ban will cover all creation of posts under powers which have been delegated to any organization regardless of the source of such authority or power,” it said.

“lf any posts have been created after 01.07.2020 under delegated powers or authority, without the approval of Department of Expenditure and have not yet been filled, then such posts shall not be filled,” it said. Urgent vacancies will be filled only after the proposal is approved by the DoE, it said.

Divakar Vijayasarathy, founder and managing partner at consulting firm DVS Advisors LLP, said, “Given the severe lockdown due to the pandemic, it was certain that there would be a strain on the fiscal deficit and that fiscal consolidation would not be possible. Various estimates are going around on the fiscal deficit for the year crossing 7 percent.”

“In this backdrop, probity in cutting down avoidable expenditure was expected and the latest measures are welcome... Though the government is under criticism for its measures; given the gravity of the situation, austerity steps, especially on avoidable expenditure, is welcome,” he said.