Random Thoughts
D Dhanuraj
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"A budget is more than simply numbers on a page. It is a measure of how well we are living up to our obligations to ourselves and one another", says President Barack Obama

In the recent years, union budgets always attracted media attention. This year too, lot of hype was built around the budget before its presentation. Many media channels were competing against each other to make their points heard to Pranab Babu. Once the budget was presented, the hoopla got over. The Sensex crashed (not by original definition) as per the media journalism goes. Was it the reflection of the budget? I wonder when they were presenting their views to the Finance Minister prior to the budget, had they been sensitised by the Stock markets so that there were upwardly movements even during the time of recession. If that is the case, I wonder do we need to have the present system of budgeting process. Can't we do away with the present centralised system of the budgeting to financial statements of the Government organs?

Much of the opposition was on the deficit budgeting and increasing gap on the revenue and expenditure not meeting Fiscal Responsibility and Budget(FRBM)requirements. Given the status of the budget outcomes and the discussion on the direct transfer of money to the needy, what we need is a Fiscal Prudence and Performance Rating(FPPR),a Sequel to FRBM. I remember that one of my friends in Department of Economic Affairs had dealt with this issue some time ago. The service delivery system in this country has improved a lot during the last one decade but the policy making and decision taking processes are not at the right time of the discourse of the economic growth needed for this country. This has a definite negative impact on the progress we look forward to. If it was 15 percentage of delivery of the total amount allocated in 1985 (famous Rajiv Gandhi quote), pilferage and leakage has increased over the years as a result of increased allocation of money in schemes like National Rural Employment Guarantee Act (NREGA), Sarva Shikshya Abhiyan (SSA)etc. As in the case of the Green Book methodology in UK, there should be an economic assessment of the social costs and benefits of all new policies, projects and programmes including the economic assessment of regulations under regulatory impact analysis. All spending proposals should be accompanied by a proportionate and well structured business case. In a socialist country like ours where we are trying to meet the challenges of social issues like poverty, illiteracy, unemployment et al., guidance on preparing and assessing the service delivery mechanism based on Budget allocations shall be on a performance rating mechanism. As in the case of Green Book in UK, FPPR shall offer supplementary guidance on specific issues such as risk and optimism bias and a detailed departmental guidance when used in specific instances such as Competition, Crime or the Environment.

A clear and well defined guideline under FPPR can set firm and yearly Departmental Expenditure Limits and, through Public Service offerings (we need to look at options like vouchers, direct cash transfer etc instead of subsidies), define the key improvements that the public can expect from these routinely debated budget promises. This will help to have significant increases in resources for the Government's priorities, matched by far-reaching reforms, and will have set ambitious targets for improvements in key public services: in education, health, transport and criminal justice. USA has a similar system known as Office of Management and Budget (OMB). Everywhere the efficiency aspect of govt expenditure should be monitored and disclosed public. This would be a regular exercise involving government machineries, academia and civil society organisations. Some times I wonder how the project proposals are prepared in the Government system; do they do a SWOT for the proposals; do they project expected outcomes; do they search for tangibles? May be this is another way in which Government differs from the private sector. FPPR is the most relevant reform process that we should aim for in the present scenario.

D. Dhanuraj is the Chairman, Centre for Public Policy Research,Kochi, India

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