Model Question and Answers for APSC | Public expenditure management is a challenge to the Government of India in the context of budget-making during the post-liberalization period. Clarify it.

Public expenditure management is a challenge to the Government of India in the context of budget-making during the post-liberalization period. Clarify it.

Model Question and Answers for APSC |  Public expenditure management is a challenge to the Government of India in the context of budget-making during the post-liberalization period. Clarify it.

Ans: Public expenditure management (PEM) is an approach to public sector budgeting that is oriented towards achieving socially desired outcomes. Primarily it concerns overall fiscal discipline, allocation of resources, operational efficiency and macro-economic stability.

Post-1991 reforms the government’s role has changed from being the driver of economic growth to that of a facilitator of the growth process which has borne new challenges in budget making.

The public expenditure management as a challenge to the budgetmaking:

1. Unrealistic budget estimates, Delay in implementation of projects

2. Skewed expenditure pattern, Inadequate adherence to the multi-year perspective and missing ‘line of sight’ between plan and budget

3. Mis-stating of financial position, Ad hoc project announcements

4. Little relationship between budget as formulated and budget as executed;

5. Poor planning; Often No links between policy making, planning and budgeting; Poor expenditure control;

6. Inadequate funding of operations and maintenance; Inadequate accounting systems;

7. Unreliability in the flow of budgeted funds to agencies and to lower levels of government;

8. Poor management of external aid; Poor cash management; Inadequate reporting of financial performance

Government measures for effective PEM:

1. Fiscal Responsibility and Budget Management Act, 2003

2. Removing Plan/Non-plan distinction

3. Rationalization of various schemes of centre

4. Creation of Monetary Policy Committee for better inflation targeting.

5. Deepening of Fiscal Federalism by more devolution of funds to states and providing more untied funds

6. Public Fund Management System (PFMS) and e-will for transparency in PFMS

7. Rationalizing subsidies in recent years, and moving toward DBT

8. Furthermore moves like e-RUPI will enhance the quality of public expenditure management (PEM)

9. New public sector enterprises policy

10. Synchronizing centre and states infrastructure development plans under National Infrastructure Pipeline Plan