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Budget is a political document that helps unfold the vision of governance through its ellaboratio upon government's reciepts and expenditure. The budgetary procedure in India involves four different operations that are;
However, this process faces certain weaknesses in its due course of action as pointed out by the 2nd ARC. These include;
i. Poor planning; ii. No links between policy making, planning and budgeting; iii. Poor expenditure control; iv. Inadequate funding of operations and maintenance; v. Little relationship between budget as formulated and budget as executed; vi. Inadequate accounting systems; vii. Unreliability in the flow of budgeted funds to agencies and to lower levels of government; viii. Poor management of external aid; ix. Poor cash management; x. Inadequate reporting of financial performance; and xi. Poorly motivated staff.
To overcome these weaknesses, following reforms have been sighted by the 2nd ARC in its 14th Report on Public finance management that still hold ground:
1. Reforms in Financial Management System are part of overall governance reforms: Governance reforms to bring about improved transparency, greater accountability, streamlining the structure of the Government, elimination of corruption, and fiscal and environment sustainability have to be backed by reforms in the financial management system in order to deliver the desired results. At the same time, it needs to be understood that reforms in the management system are not an ending itself but a means to achieving good governance. 2. Sound financial management is the responsibility of all government departments/agencies 3. Medium-term plan/budget frameworks and aligning plan budgets and accounts: Even when there are medium- term frameworks like five-year development plans, there is need for aligning the annual budgets explicitly with the plans and with the accounting mechanisms so that there is a clear ‘line of sight’ between the medium term developmental plan and the annual budget exercise. 4. Prudent economic assumptions: The tendency to be overly optimistic has to be avoided. 5. Top-down budgeting techniques: There is need to shift from the traditional bottom up approach to budgeting to a top-down framework where the desired outcomes should point to the resources required which should be allocated thereafter at the macro level sector-wise. This in turn would lead to focus on outputs and outcomes rather than on inputs and processes. 6. Transparency and simplicity: The budget documents should be simple and easy to comprehend and be available in the public domain. 7. Relaxing central input controls 8. Focus on results 9. Adopting modern financial management practices: Modern financial management tools like accrual accounting, information technology, financial information systems etc. need to be used to improve decision making and accountability 10. Budgeting to be realistic: Unless the projections made in the budget are reasonably accurate, the budgetary exercise loses credibility
Overall, like any process, the budgetary pocess needs to have some basic qualities of Clarity, Completeness, Efficiency and Effectiveness. Only then it would be able fo create the necessary governance flux desired from it in the present context of India's political economy.
By: Abhishek Sharma ProfileResourcesReport error
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