India Opts For Austerity Measures Amid Covid-19 Pandemic
Parliament House is seen through a plastic barrier in New Delhi, India. (Photographer: T. Narayan/Bloomberg)

India Opts For Austerity Measures Amid Covid-19 Pandemic

India asked government departments to not initiate any new public-funded schemes in the ongoing fiscal, besides those announced in the Rs 20-lakh-crore post-pandemic financial package.

The move was prompted by the need for prudent utilisation of public resources in accordance with change in priorities due to the Covid-19 pandemic, according to an office memorandum by the Ministry of Finance.

According to the memo, no new scheme or sub-scheme, under any administrative ministry, including proposals by Standing Finance Committees or Expenditure Finance Commissions should be initiated in the ongoing financial year. The initiation of new schemes approved in 2020-21, by any ministry, will remain suspended till March 31, 2021 or till further orders, it said.

This will also be applicable for those schemes for which ‘in principle’ approval has been granted by the Department of Expenditure under the Ministry of Finance.

Prime Minister Narendra Modi last month had announced the ‘Atmanirbhar Bharat Abhiyan’ to help revive the economy that’s headed for its first full-year contraction in more than four decades. That was followed by Finance Minister Nirmala Sitharaman’s press conferences, outlining the details of the package that included measures for MSMEs, non-bank lenders, salaried employees, power distribution companies, real estate developers, agriculture, fisheries, and migrant workers, among others.

The government also aims to cut spending on items that have low multiplier effect on the economy as its revenue is stressed. The Finance Ministry had capped spending by some ministries for the April-June period. These guidelines are likely to continue further but not necessarily at the current percentage, Expenditure Secretary TV Somanathan had told BloombergQuint in an interview last month.

The continuation of existing schemes, according to the memo, has been extended till March 31, 2021, or until recommendations of 15th Finance Commission come into effect.

The continuation of all schemes will be based on an outcome review, it said. “The continuing schemes need to be appraised and approved further for the period 2021-22 to 2025-26 after the 15th Finance Commission recommendations are accepted and resource position of public exchequer is clear,” the memo said.

Any exception will require approval of the Department of Expenditure, it said.

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