India markets close in 3 hours 10 minutes

Govt Goes Into Austerity Mode With Freeze on New Schemes as Coronavirus Cases Throw a Curveball

In a move to tighten spending triggered by the coronavirus pandemic’s impact on the economy, the finance ministry on Friday suspended all new schemes till the end of March next year.

Only schemes announced under Aatmanirbhar Bharat Abhiyan and Pradhan Mantri Garib Kalyan Yojana will be initiated and continued. No other scheme would be approved this financial year, said the ministry. Schemes already approved under the Budget will also stay suspended till March 31.

All ministries have been told to stop sending requests for new schemes to the finance ministry. "It may be appreciated that in the wake of the COVID-19 pandemic, there is an unprecedented demand on public financial resources and a need to use resources prudently in accordance with emerging and changing priorities," a finance ministry note said.

The note also said any exception to these new rules would need to be approved by the Department of Expenditure.

The coronavirus pandemic has accentuated the growth slowdown in India, with the lockdowns imposed to curb the spread of the virus leading to a severe economic stagnation and taking a huge toll on the government’s revenues.

The Reserve Bank of India had even refrained from providing a gross domestic product (GDP) growth forecast for the year, or the likely trajectory for inflation. “Given the uncertainties, GDP growth in 2020-21 is estimated to remain in negative territory,” Governor Shaktikanta Das said a couple of weeks ago.

The economic recovery, experts have said, would depend on how quickly the country can flatten the coronavirus case curve. If it takes longer to get the surge in coronavirus cases under control, it could delay when states and regions can begin reopening their economies.

With infections in India still on the rise after more than two months of lockdown and the peak expected to be some time away, the government is tightening its fist.

India on Friday saw the biggest rise in coronavirus cases in a day - 9,851 cases and 273 deaths in the last 24 hours. The number of cases in the country has climbed to 2,26,770. India is now the seventh worst-hit nation after the US, Brazil, Russia, the UK, Spain and Italy.

In another cost-cutting measure, the central government had earlier frozen the Dearness Allowance portion of employees salaries till next year, and several states had also followed suit.