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Presenting the highlights of the Report of the High Level Committee on Efficient Management of Public Expenditure, the Chairman of the Committee, Dr C. Rangarajan, spoke to Business Line .
Excerpts from the interview:
On discontinuation of classification of expenditure
The present classification of expenditure into Plan and non-Plan leads to several contradictions. It also leads to the neglect of the maintenance of assets such as roads and upsets the balance between the creation of physical infrastructure such as schools or hospitals and the manpower required for them. One is treated as Plan expenditure and other as non-Plan expenditure.
So you can get a situation where by increasing Plan expenditure, you may build more hospitals and schools but because teachers and the doctors are treated as non-Plan expenditure, and if that does not increase adequately you can end up with schools without teachers and hospitals without doctors. Our recommendations seek to solve this problem.
On reduced role of the Planning Commission
No. The report only says that the Ministry of Finance and the Planning Commission will together determine the total allocation for health or education or any other area. It is not the exclusive domain of any one of the two. Even today, for example, gross budgetary support is being determined by the Finance Ministry and given to the Planning Commission which allocates it among ministries. We are now saying that the total allocation for a particular area may be determined through consultation between the Planning Commission and the Finance Ministry. Then the total resources available, say, for education and health, will be distributed in the specified manner by the Planning Commission in consultation with the administrative ministry.
On the effect on the allocation of resources to the States
The Planning Commission in consultation with the State governments will decide the total size of the Plan.
On new classification for Budget 2013-14
The report represents the collective opinion of a fairly wide cross section of people who are involved in the planning process, in expenditure allocation. Therefore, I believe that a decision can be taken very quickly. The most important recommendation regarding classification of expenditure between Plan and non-Plan will first be taken in the full Planning Commission. It will then go to the Cabinet. Simultaneously, discussions will also be held with the States. It could take the rest of current fiscal year before a decision is taken.
On review of the growth estimate for 2011-12
We will take a review later. But I think that growth rate of 7.7 per cent in the first quarter is in line with an overall growth rate of 8.2 per cent, because we expect the growth rate to pick up in the second half.
On the RBI's stance on interest rates
If inflation shows signs of declining, it may be appropriate for the RBI to reverse the trend. But if it does not, I think the present stance will continue.
On solutions for policy paralysis
Taming inflation, containing the fiscal deficit and achieving the physical targets for the various sectors are the three things we should do.
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