Survey seeks reforms in expenditure

C Rangarajan had also recommended doing away with the distinction between Plan and non-Plan expenditure

Don't want to miss the best from Business Standard?

Economic Survey, 2013-14 has recommended the government go for expenditure reforms, so that allocations result in targeted outcomes, at low costs.

Amid the debate over doing away with the Planning Commission’s power to allocate resources, the survey said, “At present, in India, a government department gets resources through two mechanisms — the budget process run by the Ministry of Finance, and the budget process run by the Planning Commission. This leads to sub-optimal resource allocation, as well as diffused accountability.”

Earlier, an independent evaluation office attached with the Planning Commission, too, had questioned the commission’s budgetary-allocation powers. In a letter to Prime Minister Narendra Modi, the office had said the role of the Planning Commission should be reduced to that of a think tank, with sector-specific experts.

TO SHELL OUT MORE

• Survey wants government to allocate budgetary resources  through finance ministry only
• Currently, Plan expenditure is fixed by the Planning Commission
• Wants report card of various departments on outcome of expenditure, to be prepared by independent organisations
• A set of consequences if department fails to achieve targets
• Wants government to move towards accrual-based accounting  from current cash-based  accounting
• In accrual-based accounting, payments say towards subsidies will be accounted for the year when it occurs, irrespective of when it is paid actually

In 2011, another panel, headed by C Rangarajan, former chairman of the Prime Minister’s Economic Advisory Council, had also recommended doing away with the distinction between Plan and non-Plan expenditure.

Reportedly, the Planning Commission has recommended an increase of Rs 11,000 crore in Plan expenditure in Budget 2014-15, to be presented on Thursday, against Rs 5.55 lakh crore provided in the interim Budget.

The Economic Survey’s suggestion of a single entity for expenditure allocation is also aimed at creating a feedback mechanism and increasing accountability. For this, the survey suggested the finance ministry, through independent organisations, prepare a report card of the work done by every ministry. It added the ministry should also initiate a formal budget process, taking into account budget constraints, outcomes and targets.

In case a department failed to achieve its targets, there should be a fixed set of consequences, the survey said.

It questioned the country’s cash-based accounting process and sought the government move towards an accrual-based system, through which annual income and expenditure is tallied with the activities during the year concerned.

For instance, if there is fertiliser subsidy in a particular year, the cost of that subsidy should be counted in the same year, irrespective of when the actual payment of the subsidy is made. Currently, subsidies from current year are rolled over to the subesquent year.