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From outlays to outcomes

From outlays to outcomes
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First Published: Sun, Sep 06 2009. 09 05 PM IST
Updated: Sun, Sep 06 2009. 09 05 PM IST
India’s current government has emphasized “inclusive growth”, getting the benefits of growth to a broader cross-section of the population. If the market rewards best those who already have advantages—assets, education or connections—government has a role in helping the disadvantaged. The United Progressive Alliance (UPA) coalition has stepped up spending on programmes designed to help the poor, especially those in rural areas. This spending helped it get re-elected. But there is still a big question, one that has been around for decades: Is such spending effective? Does it reach those it is meant for, and does it have the effects that were intended?
Early in its first term, the UPA raised the issue of focusing more on outcomes, and implemented a version of outcome budgeting. This has led to increased effort at counting and reporting numbers (children getting midday meals, improvements in literacy rates, etc.). But this falls short of providing a clear view of the path from outlays to outcomes. We do not know which interventions lead to which improvements, how reliable the data is, or what the benchmarks should be. The fact that implementation takes place at the level of states, districts or local governments, where budgeting practices are much less developed than at the national level, compounds the problems.
These problems are recognized, but what is being done? Two weeks ago, I participated in a conference in New Delhi, co-organized by the accountability initiative of the Centre for Policy Research in the Capital, and the Centre for Development Finance, part of the Institute for Financial Management and Research in Chennai. Accountability was an important theme: the idea that the government should be accountable for the (taxpayer) money it spends. Much of the focus was on accountability through external monitoring. Non-governmental organizations can serve as channels for citizens to evaluate how their government is doing.
Of course, this “social auditing” is only the first step towards accountability. There have to be consequences. Either the citizens have to be able to remove poorly performing government decision-makers, directly through elections, or indirectly through various means where the government officials are unelected. External accountability can also include voting with one’s feet (migration), which does happen in India but without much consequence as yet for sub-national governments.
External accountability is complemented by, indeed builds upon, internal accountability. This can be vertical, through the hierarchies of governments and government organizations, or lateral, through various checks and balances within government. The reason this is fundamental is that while citizens can try to escape or change governments, it is only through improving internal governmental functioning that effectiveness is improved. This point was brought home for me when I surveyed international experience with using information technology (IT) for expenditure governance, as I was asked to do for the conference. What struck me was that while IT is often lauded for giving citizens a more effective interface with the government (and this is very true for a range of functions, including delivery of public services and citizen monitoring), the real success stories come when good IT systems are incorporated throughout governmental organizations.
Successful implementations of IT systems, whether for public or private organizations, invariably require reorganization and retraining of employees. This brings one to the most fundamental step in improving the linkage between outlays and outcomes: restructuring government. Some of this has happened piecemeal in the “reform era”, even if not intended quite in this manner: State and local governments have been given more authority and freedom of action. Local governments have also been given more scope for direct external accountability, through having elected officials. But lower level governments should be given more authority to tax, to match their spending responsibilities. This will reduce the long chains of flows of funds, which lead to waste, distortions and weak accountability. Of course, this does not preclude civil service reform at the national and state levels, which is desperately needed. The first UPA government raised the issue, and then let it fade away.
Can a poor country such as India have a more efficient government, one which spends more effectively? After all, poor institutions are a symptom of underdevelopment. I think the success of India’s top IT firms demonstrates that India’s governments are underperforming, even for a poor country. These IT firms put world class internal processes in place, leading to high productivity, even in the absence of an efficient public infrastructure and a top-notch educational system to fill their ranks.
The experience of other developing countries suggests that restructuring government, using new internal expenditure and budget management IT systems as the lynchpin for organizational reform, could work in India. This process, while beginning at the national level, would have to be pushed down to the states, which are the key to better expenditure management, even when funds originate from the Centre. Structure must follow the strategy of getting from outlays to outcomes.
Nirvikar Singh is professor of economics at the University of California, Santa Cruz. Your comments are welcome at eyeonindia@livemint.com
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First Published: Sun, Sep 06 2009. 09 05 PM IST