Govt starts biggest ever overhaul of Budget

The finance ministry set in motion the most comprehensive overhaul of the Budget exercise in independent India, as it issued the Budget circular on Thursday evening. The circular is the starting point of preparations of the Budget.

The 2017-18 Union Budget is likely to be read on the last day of January, instead of the last day of February. It will also be the first one in which the railway Budget and the general Budget will be merged.

Read our full coverage on Union Budget 2016

The circular said there would be no five-year plans after April 1, 2017 when the 12th five-year Plan comes to an end, justifying the need for doing away with Plan and non-Plan expenditure. There will only be revenue and capital expenditure classifications in the Budget.

"The reclassification of expenditure under accounting heads will start from Budget 2017-18 and after the 12th Plan period (2012-17) comes to an end," the circular noted.

Keeping an eye on early presentation of the Budget, meetings for fixing revised estimates would start from October 17. It should be noted that date of the presentation of the Budget has not been fixed yet, though the Cabinet has given its in-principle approval for the same.

With the phasing out of Plan/non-Plan classification, the finance ministry is overhauling the way it funds and monitors centrally sponsored schemes and disburses money to various government departments.

"The focus would be on top-down budgeting where the resource priorities are guided by medium- and long-term strategies. The yearly sectoral priorities and allocations would also be set accordingly. Based on the medium-term allocations under the Medium Term Expenditure Framework statement, the ministries would set a outcome/output framework," the statement noted.

This means, expenditure targets will be on a rolling basis, where the spending for any upcoming year will be decided upon spending in the current year. Instead of deciding spending on schemes based on the amount of money needed to be spend (input), it will now be decided upon targeted outcomes, which will be quantifiable in nature.

"There is also an endeavour to move towards giving ministries maximum flexibility to re-appropriate amongst schemes and components of expenditure within a scheme, required to maximise the achievement of the agreed objectives," the circular said.

The advancement of the timelines means that the final upper ceilings for the centrally sponsored schemes will be decided by mid-January.

The central government's spending will now be divided into some broad categories. Establishment expenditures will be the administrative spending of the Centre, which will include salaries, medical expenses, wages, overtime allowances, travel expenses, office expenses, materials and supplies, training, among others. Expenditure on central sector schemes will include all those schemes which are entirely funded and implemented by the central government.

Other kinds of central expenditure will include spending on state-owned companies, autonomous bodies, etc. Finance Commission transfers will only come in the demand titled 'transfers to states'. The category 'other transfers to states' will include all other transfers to states such as those made under the National Disaster Relief Fund, and assistance under similar schemes.