A case for Budget Research Office

This office will bring in the expertise required to scrutinise the demand for various grants objectively

By Author Nayakara Veeresha   |   Published: 6th Jan 2021   12:05 am Updated: 6th Jan 2021   1:22 am

In the wake of the coronavirus pandemic, both the Union and State governments are looking forward to making use of the Budget as an instrument to achieve fiscal prudence. Various stakeholders expected something different from the 2020 Budget, on the measures to stimulate the economic growth and reformative steps in health infrastructure, banking, trade and commerce, etc. However, only less than 1% was allocated for health infrastructure. The pandemic has forced many State governments to revise the estimates to augment the revenue loss.

Public finance experts have opined that the Budget has not made use of the opportunity to revive the growth and has failed in containing budgetary deficits. Why is that India has not been able to contain the ever-widening income inequality and has poor educational and health outcomes despite over seven decades of budgeting experience?

Budgetary Process

In this context, it is essential to analyse the budgetary process in a parliamentary democracy. This is necessary to reform our budgeting system so as to meet the growing demands of the nation to achieve sustainable growth and better human development outcomes.

In India, the executive-led specifically the role of bureaucracy is prominent in the budget-making process. This exercise is largely a bottom-up mechanism where the departmental heads provide the budgetary estimates for the expenditure, revenue and capital formation. The Legislative (ie, parliamentary) oversight is not adequate and gives rise to ineffective resource allocations. The indicators of human development and its disparity among and within the States substantiate this point in a credible manner. Hence, strengthening the legislative oversight and control is imperative for enhancing the role of Parliament in budgetary governance.

Philip Norton, one of the leading parliamentary scholars, argues that there is “an unequal relationship between the executive and the parliament. In that relationship, the executive is not just dominant but overly dominant”. In the context of enhancing the role of Parliament in the budgeting process, he classified three areas: budget approving, budget influencing and budget making.

Major Weaknesses

The Indian Parliament is a budget approval system. The Second Administrative Reforms Commission (SARC) in its 14th report titled ‘Strengthening Financial Management Systems (2009)’ has identified certain major weaknesses in the current budgetary system and implementation process. These are unrealistic Budget estimates, delay in implementation of projects, skewed expenditure pattern, inadequate adherence to the multi-year perspective and missing ‘line of sight’ between plan and Budget, no correlation between expenditure and actual implementation, mis-stating of financial position, ad hoc project announcements, emphasis on compliance with the rules and procedures over outcomes and irrational plan and non-plan distinction. Expecting a robust Budget out of such a weak system negates the empirical reality of budgeting and its underlying mechanisms and processes.

These problems are visible in most of the Westminster model of Parliaments, including India. To address the weaknesses in the budgeting process, the Commission has recommended broader budgetary reforms as identified by The Organisation for Economic Co-operation and Development (OECD). They are medium-term budget frameworks, prudent economic assumptions, top-down budgeting techniques; relaxing central input controls, focus on results, budget transparency and modern financial management practices. The Commission has recommended the strengthening of parliamentary control and oversight through parliamentary committees and departmentally related standing committees.

Of late, many Westminster type of Parliaments had brought reforms in the budgeting exercise by various measures and initiatives. One such initiative is the establishment of Parliamentary Budget Office (PBO), which provides an independent and objective analysis of the fiscal estimations made by the departmental heads and the Budget prepared to parliament and parliamentary committees. The PBO system is functioning in the United States, Canada, Australia, Austria, South Korea, Italy and Mexico. Afghanistan, South Africa, Ghana, Thailand, Uganda and Nigeria have separate independent budgetary units.

Rajya Sabha Chairperson and Vice-President Venkaiah Naidu emphatically notes that “establishing the PBO in Parliament is a legitimate measure to strengthen the reputation of our Parliament in budgetary governance”. Given the weak database structures, especially below the State level, financially strained relationship between the Union and the State governments, it is important to add research dimension to the PBOs in the Indian scenario.

Budget Research Office

Vote Sans Discussions

The need for the establishment of Parliamentary Budget Research Office (PBRO) stems from the fact that the present standing committee system lacks the necessary technical and other competencies that are required to scrutinise the demand for grants by the Ministries. In the current system, most of the demands of the Ministries are guillotined, ie, put to vote without any discussion. The PRS Legislative Research has found that Parliament has not spent adequate time in discussing the Budget. This is happening because the Members of Parliament (MPs) are not sufficiently equipped with the required knowledge of Budget and its criticality in delivering effective public services.

The PBRO is intended to fill this gap among MPs. The existing research and library system available for the MPs is unable to impart the specialised domain expertise, which is required for the active and meaningful engagement in the budgetary process. The strong saving tradition among the citizens of India provides the much needed inspiration for our MPs to enhance their capacity building to deliver better development outcomes at the local level by strengthening their knowledge in the budgeting activity within Parliament.

The PBRO as an independent organisation must build a mechanism so as to take into account the views and opinions of the citizens and civil society organisations, including the media, on the Budget. This will help reduce the gap between the policies of the government and the aspirations of the people. The current government has started modernising the Parliament building; similarly, it can also consider PBRO for effective budgetary governance.

(The author is PhD Fellow & Guest Faculty at the Institute for Social and Economic Change, & Department of Studies in Law, University Law College, Bangalore University Bengaluru)

Now you can get handpicked stories from Telangana Today on Telegram everyday. Click the link to subscribe.

Click to follow Telangana Today Facebook page and Twitter .