In India, A Different Kind Of Austerity

By Elliot Hannon

Published June 11, 2012 at 3:37 AM CDT

Facing economic woes, India is looking to trim spending - but cutting government services is extremely unpopular. Instead, politicians are targeting foreign travel and meetings at lavish hotels like the Oberoi in Mumbai.

In Europe, the concept of austerity has meant deep, painful cuts to government spending. In India, however, austerity looks a little different.

India's government has started by reeling in departmental spending on things like hotel space and foreign travel. It may seem like window dressing, but it can be difficult to make deep spending cuts in that country. Many voters see government largesse as a right and usually applaud pork-barrel spending.

Mihir Sharma, a columnist at the Business Standard newspaper, says the government is trying to combat poverty, malnutrition and other critical needs.

"A snotty-nosed 27-year-old analyst on Wall Street might be concerned that the government has not, in fact, announced a cut in entitlements of one kind or another," he said. "But the truth is that most of the entitlements that the government has handed out in the past 10-15 years are desperately needed."

Instead, he explained, the Indian people expect to see government departments tightening their own belts.

"What austerity actually does wind up meaning here is a very sort of strange Gandhian thing," Sharma added, referring to the philosophy espoused by the country's independence leader Mahatma Gandhi. "We want our leaders, and our government, to be demonstrating some sort of personal commitment to an austere lifestyle."

The government has also announced that it will cut 10 percent of discretionary spending, and that it will put a hiring freeze on the civil service. Analysts, however, say that's unlikely to make much of a dent in India's $91 billion deficit.