Advancing Budget to Feb 1 will ensure quality in Govt expenditure

 

 

*Prakash Chawla

 

 

The Central Government earmarked close to Rs 20 lakh crore on the expenditure head of the Budget for 2016-17. It would be safe to assume that for the financial year 2017-18, the total expenditure to be allocated by Finance Minister Mr Arun Jaitley would be between Rs 22 lakh crore and Rs 23 lakh crore. This would be about 14 per cent of India’s Gross Domestic Product at current prices.

 

Unlike in the past when the Budget was presented to Parliament on the last working day of February, the Finance Minister would do the honours on February 1, for 2017-18.  Without going into any political debate, an independent analysis would certainly make out a strong case for advancing the Budget presentation, purely on the ground that it would help the government to achieve two most import objectives.

 

The first and foremost goal is and should be to achieve the quality of expenditure and the way the Central schemes and projects are executed would certainly change when the money allocated to each of them is approved by Parliament well in time and transferred to the concerned departments or ministries.  The second achievement following from the first would be the difference a quality government spend makes to the country’s GDP growth. The government expenditure in excess of Rs 20 lakh crore would make a huge difference to revival of investment and boosting consumer demand, also helped by implementation of the Seventh Pay Commission report for the Central Government employees.    

 

Under the system  prevalent so far, the Budget is presented in the Lok Sabha on the last working day of February and a vote on account is obtained from Parliament to draw money from the Consolidated Fund of India from April 1, the opening day of the new financial year.

 

The Budget session is divided into two phases and it is in the first phase that the Vote on Account is obtained to enable uninterrupted functioning of the government while the full and final Parliamentary go-ahead is available some time in May towards the end of the  second phase of the Budget  session.  While the Finance Minister’s Budget Speech comprising tax and non-tax proposals at the time of the Budget presentation is considered an important policy direction of the government of the day, quite often his closing speech at the end of the exhaustive parliamentary debate on the Budget is used at times to make any amends, depending on the popular response to the Budget proposals.

 

But by the time the full and final outlays are available, at least first quarter of the financial year is over and out.  It is in the second quarter that the departments begin work on implementing the projects and programmes as announced in the Budget, the most important blue-print of the government.  The government funds cannot be spent just like a private business house does. It must follow well laid down procedures which can stand scrutiny of the Comptroller and Auditor General of India (CAG) and various other agencies like the Central Vigilance Commission, besides Parliamentary committees.  No wonder, the bureaucrats tasked with the implementation of the programmes and policies would rather err on the side of caution.  The entire procedure of floating tenders, finalizing the deals etc can take another few months, making it possible for the departments to place the orders with the contractors only in the middle or end of the third quarter in most cases. The money gets spent in the last quarter and somehow, has to be spent by March 31.

 

Naturally, the pressure is back-loaded on the system, resulting at times in dilution of the quality of expenditure, not by design but by default.

 

All that would change for better with advancement of the Budget, which should now get passed in the first phase of the Budget session even after demands for grants of different key ministries are adequately debated in both Lok Sabha and Rajya Sabha.  The intention of the government is to begin the spending programmes right in the beginning of the fiscal, making the Budget implementation front-loaded, rather than back- loaded.  

 

While such an option is always welcome, the requirement of it is much more urgent at this state of economy which has to deal with the issue of revival in consumer demand and boost investment, which has to be led by the government, given the fact that the private sector is over-leveraged with idle capacity in several key sectors. As is well conceded by senior ministers in different economic wings of the government, the state expenditure in sectors like roads, airports, ports, shipping, agriculture infrastructure etc would show the way to the economic revival in the fiscal 2017.  Once a momentum is built, the private sector should then get a multiplier effect and the entire virtuous cycle would see a transformation.

 

With an expectation of great focus on the rural landscape in the Budget, the government programmes relating to agriculture and the allied sectors should really be catalytic in the GDP momentum in the coming months.  

 

So, the entire Budget exercise must get completed sooner than later. The issues relating to the GDP relating to the current fiscal which become the basis for the next year’s Budget estimates can get sorted out with advance statistical tools and techniques. What matters is the intent.  

 

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*Prakash Chawla is a senior New Delhi-based journalist writing mostly on political-economic issues. 

 

The views expressed in the article are author’s own.