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India's Making Small Changes In Budgetary Processes For Big Improvements

03/10/2016 3:31 PM IST | Updated 04/10/2016 8:20 AM IST
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Adnan Abidi / Reuters
India's Railway Minister Suresh Prabhu holds up his briefcase upon his arrival at the parliament to present the railway budget in New Delhi, India, February 25, 2016.

By: Mukul Asher, Professorial Fellow, Lee Kuan Yew School Of Public Policy, National University of Singapore

As with other areas of public policies, progressing towards modern budget processes requires identifying seemingly small measures with potential to generate disproportionately large impacts on desired budgetary outcomes and implementing them using a problem solving paradigm, such as a Systems Analysis perspective. The underlying premise is that budgetary reforms are a process and not an isolated event.

A subtle advantage arising from these proposals is an opportunity to rethink and restructure the prevailing modus operandi, facilitating the introduction of new ideas


Three recent proposals to refine some of the elements of India's traditional budget processes present a good illustration.

No separate Rail Budget

First, the 92-year-old practice of presenting a separate Railway Budget will be discontinued from the 2017-18 Budget presentation. This helps in pursuing an integrated systemic view of India's transport system—involving rail, coastal shipping and port connectivity, and air travel— thus improving policy coherence and stakeholder coordination. It also represents a step towards making Indian Railways a professional organization in delivering the requisite mix of services throughout the country, utilizing modern management techniques and leveraging technology.

This will require the current Railway Board to be restructured for better organizational planning and leadership, particularly to leverage IR's vast assets of human resources and land, air-space, and below-ground property rights. Also desirable are measures to recruit professional staff that can help take advantage of new technologies, introduce more sophisticated pricing and product mixes, and engage in the possibilities of structuring more complex (and varied) partnerships and organizational governance structures.

An earlier Budget presentation

The second proposal is to advance the date of Budget presentation by a month to end January. This will require Budget preparations to begin at least four weeks earlier; preferably immediately after the Independence Day (which falls on 15 August). Unlike the practice so far, when final Budget approvals occurred several weeks after the commencement of the fiscal year, this proposal will result in budget formalities being completed before 1 April.

The intended objective is to address current constraints on smoother conduct of expenditure flows, and also help improve expenditure management. In turn, this could help reduce wastage in the delivery of government program benefits, an increasing priority focus of the current government.

It is strongly suggested that the states similarly advance their respective budget presentation data, and regard it as a small but significant step involving an integrated set of measures designed to improve their public financial management.

Smarter classifications

The third proposal discontinues a classification of expenditure into plan and non-plan classification, used since the 1950s, from the 2017-18 fiscal year. This is a logical step as NITI (National Institution for Transforming India) Aayog was established in place of the unlamented Planning Commission in January 2015.

These proposals illustrate how governments at all levels in India can utilize seemingly small measures to obtain disproportionately large improvements in delivering public services...

This step can be expected to assist in better expenditure management as, over the years, a tendency had developed to regard expenditure under "Plan" category as being superior in generating development than "Non-Plan" expenditure. Such (often subconscious) thinking gave support to the national tendency to give insufficient weight towards maintaining and renovating existing assets. The "operations and maintenance" category, essential for obtaining quality services over the entire life of assets, has generally not received sufficient emphasis.

Henceforth, only the "Revenue (or Current)" and "Capital Expenditure" classifications will be used. State governments are likely to follow the lead of the Union government in this regard.

The need to not regard "Capital" expenditure as being more conducive to development than "Current" expenditure will, however, remain. Restraint and continued monitoring are necessary to ensure that these categories are used according to globally accepted practices.

A subtle advantage arising from these proposals is an opportunity to rethink and restructure the prevailing modus operandi, facilitating the introduction of new ideas—a key requirement for enhancing productivity.

These proposals illustrate how governments at all levels in India can utilize seemingly small measures to obtain disproportionately large improvements in delivering public services to meet the rising aspirations of the Indian people.

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