Wednesday, 12 September 2012

C Rangarajan committee on 'Efficient Management of Public Expenditure'

A committee was set up under the PMEAC Chairperson Mr. C. Rangarajan to give recommendations on "Efficient Management of Public Expenditure". The committee submitted its report in September 2011. Its main recommendations are:

  1. The distinction between Plan and non-Plan expenditure be abolished for both the Centre and the states. Plan and non-plan distinction is neither able to adequately distinguish between development and non-developmental dimensions of expenditure, nor is it an appropriate budgetary framework. It has become dysfunctional and should therefore be removed. 
  2. All public expenditure should be split up between capital and revenue expenditure. The revenue deficit should be adjusted to the extent of grants for creating assets, but only for fiscal responsibility budget management compliance.
  3. The budgetary Plan allocation, currently decided by the Planning Commission, would be the responsibility of the finance ministry. The panel, however, would have a role in deciding the total budgetary allocation, including non-Plan expenditure, at a conceptual level. Currently, the Plan Commission looks at only Plan expenditure, while the finance ministry decides non-Plan expenditure, without reference to the panel.
  4. The ministry of finance may be responsible for guiding the fiscal policy, preparation of the Budget and financial decisions
  5. Planning Commission should be responsible for consolidation of the Five-Year Plan over all services, based on inputs from the finance ministry. 
  6. The finance ministry should be responsible for preparation of the annual Budget, based on inputs of the Commission.
  7. The panel recommended a shift in budgeting approach from a one-year horizon to a multi-year horizon and from input-based budgeting to outputs and outcomes. 
  8. Modification in accounting classification to strengthen framework for transfer of funds from centre to states. 


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