Centre defers plan to down size government - Views on News from Equitymaster

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Centre defers plan to down size government

Feb 23, 2000

According to newspaper reports, the centre has deferred a plan to downsize the government. The plan was aimed at abolishing posts that are lying vacant and/or are not likely to be filled up in the near future. The plan is likely to be reconsidered with certain modifications at a later date. Between FY94 and FY00 (BE) the central governments' administrative surged 139% as a result of the implementation of the recommendations of the pay commission in FY99. In view of the government's recent drive to cut down the fiscal deficit, measures had been initiated to reduce the size of the government.

Although the government seems to have only deferred the measure, a decision to indefinitely put it off would not augur well for the financial health of the economy. The government needs to step up spending on infrastructure and other social amenities in order to improve the standard of living in the country. However, in view of the not so buoyant rise in government revenues, the need for a rationalisation of expenditure subsidies, interest, administration has arisen.

The rationale for reducing the administration expenditure has found support mainly due to the widely accepted view that government offices are over manned and this has contributed to higher salary and maintenance expenditure. Moreover, a decision to cut down the size of the government is not expected to lead to an over burdening of resources, as current resources are grossly under utilised.

The centre has initiated a number of path breaking reforms in recent months. However, it needs to 'bite the bullet' in order to usher in a structural change in the economy.

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