The Hindu Business Line : Taking forward the `outlay vs. outcome' debate

MUCH of the discussion during the two-day National Development Council (NDC) meeting last week focussed on government programmes, with an understandable desire of the States that these schemes be expanded.

Sensing the desire of the stakeholders in development, the Prime Minister, Dr Manmohan Singh, in his concluding remarks, rightly said: "Expansion of outlays without regard to outcomes does not contribute to development."

He said that the Centre proposes to beef up the mechanism for monitoring and evaluating performance so that "we can be sure that our expenditures achieve their stated objectives," and urged the State governments to take parallel steps on their own. The Finance Minister, Mr P. Chidambaram, coined the evocative phrase "outlays versus outcomes" to development debate in the 2005-06 Budget when he said that during the course of the year, together with the Planning Commission, "we shall put in place a mechanism to measure the development outcomes of all major programmes."

Taking a cue , the Department of Expenditure in the Finance Ministry quickly compiled a draft volume on outcomes/targets as provided by Ministries/Departments. Mr Chidambaram has promised more details on his "Outlays vs. Outcomes" scorecard.

However, the timeframe to initiate a major expenditure management strategy is suggested in the draft report of the Department of Economic Affairs. Accordingly, it is proposed that by September steps will be taken for review of norms and user charges, clearance of high-value expenditures and spending not conforming to prescribed norms. All this is to ensure better focus on budgetary/exchequer control, formulation and modification of schemes. State governments would be required to file monthly expenditure returns of all Central sector and Centrally sponsored schemes. This would help in even paced fund flow and avoid bunching in the last quarter.

Also important as part of expenditure management, the Finance Ministry would, in consultation with the Planning Commission, identify schemes that are all but ineffective due to thinly-spread budgetary outlays. The is to weed out ineffective schemes/programmes that have outlived their utility.

To ensure that the benefits of various subsidies and subventions are not usurped by unintended beneficiaries, it is proposed to restructure subsidies in innovative ways to cut costs without affecting the intended beneficiaries.

The timeframe for this is by February 28, 2006. Similarly, before end-December a review of user charges would be undertaken to increase non-tax revenues and reduce the operational losses of commercial undertakings. This would help in ensuring better financial results in public sector units.

In a move to make States more prudent in managing their finances, it is proposed to rationalise the borrowings by the States. On debt consolidation and waivers, the grant of relief would depend on the States fulfilling certain conditions. These reform milestones and deadlines will ensure that outlays go some way in matching outcomes. But, politically, the coalition government has a long way to go. To take allies along on such issues as subsidies, user charges and State finances would require the combined mettle of the Prime Minister, the Finance Minister and the Planning Commission Deputy Chairman.

The outlays versus outcome debate may well turn out a duel between reforms and status quo if not regression.

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