NEW DELHI: India ordered an immediate austerity drive yesterday banning government meetings in five-star hotels, curbing foreign travel and halting the creation of new posts to help rein in a bulging deficit.
There will also be a ban on buying new vehicles, the finance ministry said in an official directive to all ministries, issued hours after figures showed that India had posted its worst economic growth in nine years.
A range of measures on “fiscal prudence and economy” have come into force with immediate effect, the ministry said, but analysts cautioned that far more effort was needed to put India’s finances on a sound footing.
Economic growth slowed to 6.5% in the 2011-12 financial year, according to the data, which pushed India’s currency to a new lifetime low of 56.50 rupees to the dollar.
“There is tremendous pressure on government’s resources, there is an urgent need for rationalisation of expenditure and optimisation of available resources with a view to improve macroeconomic environment,” the ministry said.
On foreign travel, the ministry said, the size of the delegation and the duration of the visit should be kept to an “absolute minimum”.
Holding of exhibitions, seminars and conferences abroad will be “strongly discouraged”.
The Congress-led government earlier announced tentative measures to check the fiscal deficit, which it aims to bring down to 5.1% of gross domestic product in the current fiscal year from 5.76% a year ago.
The government has ascribed many of India’s economic woes to the eurozone crisis, which has hit exports and prompted foreign investors to pile out of India into the perceived safe haven of US assets.
But the government has also come under attack for its economic management with business confidence hit by the sluggish growth, controversial tax rulings, reform paralysis and worries over rising welfare subsidies.