Perhaps sensing trouble over the huge expenditure incurred by a resource crunch State like Nagaland, the government, although long overdue, has recently done the most sensible thing to go for austerity measures—starting with cutting down on the cost of purchasing vehicles, entitlement, maintenance etc. In fact it is somewhat of an absurdity to actually spend so much on our highly decorated expensive cars and SUVs even as we seek grants and other financial packages to address our development needs along with the need to maintain our government machinery and the several lakh government employees. We all know that a major part of the State resources are being drained out owing to the salary payment of the government employees. So you see knowing fully well that we are a poor State, the government must be even more conscious from where our money is coming and where it is going. Every rupee counts. And that is why a sound expenditure management policy assumes significance and more so because of the growing revenue deficit in the State, which has brought about a situation where most government borrowings are used for financing current consumption expenditure most notably the non-plan side of the budget. Unless a sincere effort is made to keep expenditure under control, any further increase in fiscal deficit will not be good for the financial health of the State. In actual practice, Fiscal deficit per se is not a bad thing for any economy. Many countries in Europe have Fiscal Deficits of over 10% but their management of borrowing is more productively channelized into capital expenditure such as creating infrastructure. The problem stems from mismanagement of funds and also the costs incurred by non-development expenditure. To carry out expenditure reform requires greater political will in cutting down on wasteful spending and populist measures. Whether making a small cut in procurement, entitlement or maintenance of government vehicle is going to help or not, it is doubtful. If we want to really undertake a more groundbreaking austerity drive then perhaps we can start by ensuring transparency, stability and accountability in the use of government finances. It will lead to transparency in budgetary planning; ensure stability of government programs and expenditure.
The other essential components for sound expenditure management will have to include some kind of reforms in State run Public Sector Undertakings. According to the latest CAG report, the working PSUs have registered an overall loss of Rs 2.07 crore in 2010-11 and had accumulated losses amounting to Rs 18.92 crore. It is observed that the PSUs in Nagaland play a relatively minor role in our economy and perhaps the government should seriously contemplate whether some expenditure can also be cut from non-performing PSUs. And if austerity measure is to be a serious exercise, then the Chief Minister and party bosses should take the lead by cutting down on their security escorts and also for their travel outside the State they can go economy class. We are living beyond our means and this is poor economics. What is worrying is that we are a consumer State. We only know how to spend. This trend has to be reversed. The State government will have to start planning a long term road map to alter the strenuous nature of resource equations. We need to ensure that every penny is accounted for and resource is well distributed without any pilferage and wastage. Austerity therefore entails not only curtailing wasteful expenditure but good governance, fiscal discipline and strengthening delivery system so that we achieve holistic development while keeping the State’s financial condition healthy.
