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Contents
News
Structural limitations of the polity in India has led to a phrase that the government is spending a rupee to provide 50 paise of benefits.
States need to invent their own development models to escape the Financial mismanagement and the structural issues in budgeting and resource allocations.
What are the issues associated with State Funding?
The government in India provides public services at subsidized prices and at times is even willing to take losses. But Financial mismanagement in public services rise due to, 1) Policy differences between the centre and the states. 2) Differences between parties and coalitions. 3) Structural issues in the budget.
What are the structural issues in the Budget?
Accounts preparation: The Financial Accounts (FA) are presented to the legislature after 18 to 24 months of budget approval along with the Revised Estimates (RE) for the current year. This means that less attention is paid to the outcomes of the previous budget as the focus is more on the current budget.
Cash accounting: Governments sticks to outdated cash accounting as opposed to accrual(Accumulation) accounting. This leads to 1. A spending rush at the end of the year, 2. Funds marked as spent might be held in some off-balance account and hidden from the government’s finance department.
How did the Tamil Nadu government addressed the structural issues?
TN government adopted a set of 5 reforms, these include – (1) Collect and analysing data to develop a deeper understanding, (2) Data-centric governance, (3) public asset and risk management, (4) disseminating results into the public domain and generate a public debate, and (5) strengthening the role of the legislature and course correct with public feedback.
What is the outcome of TN government initiatives?
First, Approx Rs 2,000 crore of funds have been verified as “lapsed” and will be returned to the state treasury.
Second, procedures are being established to ensure that moving/parking of funds cannot happen outside the finance department’s oversight.
Third, Many discrepancies like ghost pension etc. have been identified which will translate to savings for the government.
All these steps, if executed diligently by the Centre and State governments, can overcome the issues of financial mismanagement and provide enough fiscal space to the government to meet its desired outcomes.
Source: This post is based on the article “Ensuring that policy outcome matches the intent” published in Indian Express on 3rd November 2021.
