What has Budget 2011 done for the United Progressive Alliance (UPA) government’s strengthening inclusion agenda? We need to consider two key messages that the finance minister (FM) delivered in the first ten minutes of his budget speech. First, he made clear that the country’s bank balance is in order. Swift and broad-based growth in 2010-11 has put the economy back to its pre-crisis trajectory, the FM said. So he assured the nation resources, at least in the medium term, are not a constraint. The big constraint, and this is his second key message for inclusive growth: implementation gaps, leakages from public programmes and the quality of our outcomes are the serious challenge. This message was reiterated by the Prime Minister in his address to the nation that followed the budget speech.
So far so good. After all, admitting the problem is the first step to resolving it. But Budget 2011 doesn’t do much beyond this admission. It is mostly silent on the specific reform measures that could be taken to address this serious challenge. And so we have some hikes— allocation for social sectors has increased by 17% over the current fiscal year—but hikes that will be poured in to a leaking pipe and thus yield very few results.
Take the example of elementary education. Sarva Shiksha Abhiyan, the government of India’s (GoI’s) flagship programme for elementary education, received a 40% boost, up from Rs15,000 crore last year to Rs21,000 crore this year. This hike was expected (and arguably almost too little) considering the scale of the catch-up needed if elementary schools are to comply with the Right to Education Act norms.
The big problem in elementary education financing, as I have discussed in previous columns in this newspaper, is the inefficiencies in the processes through which money flows through the system. As a result delays are common and most funds are spent in the last quarter of the fiscal year. It is unlikely that the current hike will result in improved expenditure if this problem is not resolved.
Greater transparency in financial flows and expenditure is thus crucial. In 2008, the UPA government budget mentioned setting up of a Central Plan Monitoring System but the system is not fully functional and, worse still, is not publicly accessible. So if Budget 2011 were serious about addressing the implementation and leakage problem then the first thing it should have done was to have invested some resources in setting up a publicly-accessible expenditure information network that would enable real-time tracking of government expenditures and ensure accountability for money spent. The FM did refer to the Technology Advisory Group for Unique Projects, which has recommended setting up this committee, the specifics of how and when this is to be set up is anybody’s guess.
A key issue that the FM brought up in his speech is that of the quality of outcomes.
The current delivery system is structured such that performance is only measured on the basis of outputs, the key reason for outcome failures. Here again the FM’s proposed solutions fall short. He does mention the implementation of a performance monitoring and evaluation system that has been set up in 62 GoI departments to assess effectiveness. A positive step, but a drop in the ocean. Ensuring outcomes requires far more than a results framework. It requires a system overhaul that rewards and incentivizes outcomes.
One way is to promote fiscal transfer systems that link directly with outcomes. This has been tried and implemented successfully in the Nirmal Gram Puruskar programme (NGP), GoI’s programme for promoting sanitation. If the budget were serious about addressing outcomes, it could well have introduced, even if only experimentally, a system for linking fiscal transfers to outcomes.
Finally, there is no getting away from stronger local governance if inclusion is to be truly achieved. The budget has done little to enhance financial powers and resources for local governments.
Stronger local governments can ensure that resource allocation is linked to local needs and priorities, and ensure greater people’s participation and monitoring. And they can, as the NGP example demonstrates, encourage innovation of outcomes. If there is one thing that can address the three constraints of implementation, leakage and poor outcomes, it is strong local governments. This combined with greater expenditure transparency through measures such as the expenditure information network could hold the key to addressing the nation’s most serious challenge. And this is precisely where the budget has remained silent.
In sum, we have a budget that recognizes the problem but seems to believe that the solutions lie in promoting business as usual. Thus the budget has done very little for promoting UPA’s inclusive growth agenda.
Yamini Aiyar, Director, Accountability Initiative, Centre For Policy Research