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Policy on Expenditure management in India

Policy on Expenditure management in India 

  • Public expenditure management is an integral part of fiscal reforms. The Government has taken a series of initiatives in this regard, like avoiding rush of expenditure through releases in a time sliced manner; simplification of procedures;unspent balances’ and ‘utilisation certificates’ from States and other implementing agencies; instructions that prohibit relaxation of conditionality attached to transfer of funds under Plan schemes; revision of General Financial Rules to ensure transparency, competition, fairness and objectivity in the procurement/bidding processes in the Government.
  • The Government has targeted to raise the level of public spending in education to at least 6 percent of GDP and on health to at least 2-3 percent of GDP in a phased manner.
  • It attaches high priority to the development and expansion of physical infrastructure like roads, highways, ports, power, railways, water supply, sewage treatment and sanitation through higher public investment, even as the role of the private sector is expanded. This has to be accomplished in an overarching framework of fiscal consolidation.                    Policy on Expenditure management in India
  • An important objective of the FRBMA is that public expenditure must be reoriented for creation of productive assets. Given the existing classification of expenditure, plan expenditure and capital expenditure is arguably the closest approximation to expenditure for creation of productive assets.
  • As a proportion of GDP, plan revenue expenditure has remained in the range of 2 to 3 percent. Non-plan revenue expenditure mainly comprises of interest payments, defence expenditure, subsidies, wages and salaries, pensions, transfers and other consumption expenditure of the Government which has traditionally appropriated bulk of the revenue receipts.
  • A Committee has been set up under Bimal Jalan to review government policy on expenditure management. The government has decided to abolish the Planning Commission and set up a separate apex body for planning and development.
  • The Rangarajan Committee set up in 2012 had recommended abolition of this distinction and replacing it with distinction between revenue expenditure and capital expenditure.
  • A new body NITI — National Institution for Transforming India has been set up to replace the Planning Commission.                            Policy on Expenditure management in India
  • This will function as a think-tank headed by the Prime Minister with a governing council of Chief Ministers and Lt. Governors similar to the NDC.
  • This body will substitute centralised planning with a bottoms-up approach based on cooperative federalism.


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