Modi’s Government Introduces Mandatory Spending Cuts Targeting Bureaucrats

Prime Minister Modi’s administration has just introduced new measures aiming to cut spending. Bureaucrats have been banned from 1st class air travel and 5 star hotels. The decision is to help to narrow the fiscal deficit to a 7 year low.

All ministry units are to cut non-plan expenditure by 10%, excluding defense related matters, salaries and debt repayments. Car purchases have been mostly frozen and video conferencing has been recommended to replace travels wherever possible.

“Such measures are intended at promoting fiscal discipline, without restricting the operational efficiency of the government,” the Finance Ministry said in the statement dated yesterday and signed by Ratan P. Watal, secretary for expenditure. “In the context of the current fiscal situation, there is a need to continue to rationalize expenditure and optimize available resources.”

Since winning elections in May this year, Modi has shifted toward more market friendly approach. His market-based energy pricing, allowed more foreign investment into the defense industry, and pushed to revive the manufacturing sector. He has been fighting to narrow the fiscal deficit to 4.1% of GDP in the year through March 2015 from 4.5% in the previous 12 months.

Source: Bloomberg