The moves are aimed at achieving a fiscal deficit target of 4.1% of the gross domestic product for this year.
India's economy has slowed in recent years, growing by 4.7% in 2013-14.
Prime Minister Narendra Modi's BJP swept to power in the recent election on the promise of reviving the economy.
The previous Congress-led government had initiated similar measures in 2012 and 2013 to trim the deficit.
The latest austerity measures "are intended at promoting fiscal discipline, without restricting the operational efficiency of the government", a finance ministry statement quoted by the Press Trust of India news agency said.
"In the context of the current fiscal situation, there is a need to continue to rationalise expenditure and optimise available resources," it added.
New jobs have been frozen and purchases of cars have been mostly banned, reports said. Officials have been asked to use video conferencing for meetings wherever possible.
"While officers are entitled to various classes of air travel depending on seniority, utmost economy would need to be observed while exercising the choice keeping the limitations of budget in mind. However, there would be no bookings in the first class," the finance ministry said.
The government aims to further cut fiscal deficit to 3.6% in 2015-16 and 3% in 2016-17.
Mr Modi won a landslide in the May general election with a pledge to boost growth and create jobs for one million people who enter India's workforce every month.
