Panel set up on revenue-capital model for expenditure

Government has set up a committee to prepare a new format of Budget statements and finance accounts to classify all expenditure of states as well as the Centre on 'revenue' or 'capital' basis from 2017-18.
This new classification of expenditure, which will replace existing Plan and Non-Plan distinction, will facilitate linking expenditure to outcome and better public expenditure management, simplification of accounting heads and grouping of expenditure as revenue or capital would reflect direction of public expenditure in a better way.
"We have constituted a Committee under Special Secretary Expenditure which will also co-opt a few willing State Secretaries to come up with the new format of budget statements and finance accounts.

"The primary units of appropriation at both Central and State levels will also be revisited to create a clear distinction between revenue and capital object items of expenditure, so that revenue-capital accounts can be prepared in a bottoms-up manner," Finance Secretary Ratan Watal said while addressing conference of state finance secretaries.
However, Secretary clarified that the planning will not go away and there would be a medium term planning framework so that the financial approval of schemes and projects could be synchronized with the Finance Commission Cycle.
"We also need to move to a cost centre approach, where establishments, schemes and projects are treated as such, and revenue-capital distinction will be the basis of expenditure classification as required by the constitutional framework," he said.

The NITI Aayog, he added, is looking at medium term framework, it could be on a sectoral basis.

Finance Minister Arun Jaitley in the Budget had said that successive committees have questioned the merit in having Plan and Non-Plan classification of Government expenditure.
A broad understanding over the years has been that Plan expenditures are good and Non-Plan expenditures are bad resulting in skewed allocations in the Budget, he had said.
The needs of income transfers and redistribution are imperative, he said, adding "but we must bear in mind that sustainable growth and rise in income levels can only be achieved through a sustained increase in capital spending".

Pressing for macro-economic stability to ensure sustainable growth, Watal said it is important not to get obsessed with a particular growth number, but to create conditions for a sustained and balanced growth that can "incrementally raise our per capita incomes over the next two decades, giving our fellow citizens their rightful place in the comity of nations".