Budgets are not outcomes

The 2004 budget was anticipated with particular anxiety and expectation for a variety of reasons. One, that this was a new government and therefore likely to steer a different course than its predecessor. Two, the respect that Dr.Mammohan Singh commands for his integrity, notwithstanding the Left's disagreements with his views. Three, the stated pro-poor thrust of the UPA government. Four, the nervousness in our capital markets for whom 'pro-poor' implied economic reforms taking a hit. And five, the risks and pressures of coalition politics. With so many reasons for worry and promise, little wonder that extra brouhaha was spilling all over when the Finance Minister declared his policy thrusts for agriculture, education and in continuing the economic reforms agendas.

How must the average citizen looking for better governance view the budget? The answer may be found in perspectives that have emerged from the Prime Minister himself, and also from a key economic advisor. The first preceded the budget, and the other succeeded it.

In his speech of June 24, 2004, Dr.Manmohan Singh said of the larger 'reforms with a human face' agenda: "However, I am convinced that the government, at every level, is today not adequately equipped and attuned to deal with this challenge and meet the aspirations of the people. To be able to do so, we require the reform of government and of public institutions ... No objective in this development agenda can be met if we do not reform the instrument in our hand with which we have to work, namely the government and public institutions. Clearly, this will be my main concern and challenge in the days to come."

Perhaps as a result of the PM's own candour, the response to this budget has been marked by one distinctive change in the climate of disourse in the country. The fact that the policy pronoucements, scheme announcements and fund allocations mean nothing in terms of delivery for the poorer citizens has not only been accepted in public, but this time around repeated questions of 'delivery reforms' for education and health have been raised. 10 years ago, government allocations for development were looked upon profoundly as policy propsitions in themselves, left or right. Our policy makers were never challenged at the failure of our institutions to deliver. Now, the PM says, best intentions and populist policies won't do.

Further elaboration of what is needed is found in the recent Kelkar Task Force Report on the implementation of the Fiscal Responsibility and Budget Management Act. The section on expenditure reforms is insightful in indications of how far we are from budgetary allocations to development and the public goods we may reasonably expect of our governments as a result. Kelkar goes beyond Dr.Singh's acceptance of the problem. The report outlines comprehensive expenditure reforms to make more resources flow measurably and effectively for health and education. Even the current nomenclature of plan and non-plan listing has been challenged.

Seen in this light, a key to the pro-development, pro-poor reforms success of any government in India in the coming years is the absolute necessity of fiscal decentralization and audit of development goals by outcomes, and not expenditure targets. In the absence of such reforms (the degree is matter of argument and specifics), our systemic openness to massive corruption, leakages and planned failures will remain.

Both perspectives - from the nation's apex leader and the restructuring insights in the Kelkar proposals - help place the developmental significance of the 2004-5 budget in a realistic context. Much institutional and policy reform in the country remains outside the framework of the budget itself, as Dr. Singh and Dr. Kelkar both point out. Meaningful reforms may begin with the budgetary process itself, but they additionally need to permeate much deeper into our systems and institutions.