Downward trend in budget execution

Published: September 23, 2018 21:15:52 | Updated: September 25, 2018 22:09:54

The government's penchant for making the national budget from bigger to even bigger every financial year is quite evident. Big budgets do have certain demonstrative effect, but failure to execute them creditably triggers questions about the government's intention and ability.  It is accused of playing to the gallery when budget targets, in matters of resource mobilization and development spending, are set at very high levels.

Statistics say it all. A report published in the Financial Express last week quoting preliminary estimate, done by the finance division of the government, said the execution of the national budget in the last financial year (FY) (2017-18) was the lowest in last four consecutive FYs. In fact, the gap between the target and the rate of execution widened during the period under review. The rate was 83 per cent in the FY 2015, but the same declined in the following years and stood at 68 per cent in the last fiscal. However, the rate, usually, improves in the final count, but only slightly.

The rate of execution of the budget in the current FY and the future ones would not improve unless the government curbs its tendency of setting budget targets at ambitious levels without caring to match its capacity in revenue mobilization and execution of development projects in particular. The government does need to look into the budgetary process in the perspective of its own execution capacity. If, in the final count, one-fourth of the original budget remains unimplemented at the end of a financial year, the setting of high goals turns out to be a futile exercise.

However, it has become a regular practice with the government to downsize the original budget in the third quarter of a financial year because of slow rate of execution. Even then the actual rate of implementation remains below the downsized or revised budget in most FYs. When spending, in the final count, remains well below the estimate in the original budget, one feels tempted to question the rationale of presenting such 'bloated' variety of budget by the finance minister before the start of every financial year.

On a number of occasions, multilateral donors and experts at home advised the government to make budgets in the light of its own ability, in terms of resource mobilization and also keeping in view the weakness of the public sector agencies in execution of development projects. They did not stop there. Suggestions have also been aplenty with regard to building capacity of the tax administration and also of the agencies involved in the development process.

A few reform measures carried out in the tax arena have produced some positive results. A part of the tax administration is now automated and taxmen are relatively better motivated. However, far more needs to be done to improve the country's tax-GDP ratio, which is one of the lowest in the world. As far as ability of the public sector agencies in implementing projects is concerned, the situation has remained more or less unchanged but the government has raised the level of development financing to a great extent. Under the circumstances, the government needs to be practical and prudent in the task of budget preparation and execution.

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