What is Outcome Budget?

Expenditure, expenditure and more expenditure. On thousands of developmental schemes in the country. One hears a lot of this in India.

But critics rue that the actual implementation of these schemes is not much spoken about. Nor is there any mechanism to ensure accountability when schemes are delayed, leading to loss of precious funds due to cost-escalation.

Well, Finance Minister P Chidambaram might just have the answer to that: in the form of the proposed Outcome Budget, which to be presented in Parliament on Thursday.

But what is this Outcome Budget? And how does it help the government monitor schemes for which huge outlays are sanctioned? Read on to find out.

Presenting the Union Budget 2005-06 in Parliament on February 28, 2005, the finance minister had said: "I must caution that outlays do not necessarily mean outcomes. The people of the country are concerned with outcomes. The prime minister has repeatedly emphasised the need to improve the quality of implementation and enhance the efficiency and accountability of the delivery mechanism."

"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. We shall also ensure that programmes and schemes are not allowed to continue indefinitely from one Plan period to the next without an independent and in-depth evaluation," he said.

"The civil society should also engage the government in a healthy debate on the efficiency of the delivery mechanism," he had added. "At the end of the year, we should ask not how much has been spent, but what has been achieved," he said.

So what is Outcome Budget?

The Outcome Budget will be a progress card on what various ministries and departments have done with the outlay announced in the annual budget.

It is a performance measurement tool that helps in better service delivery; decision-making; evaluating programme performance and results; communicating programme goals; and improving programme effectiveness.

The Outcome Budget is likely to comprise scheme- or project-wise outlays for all central ministries, departments and organisations during 2005-06 listed against corresponding outcomes (measurable physical targets) to be achieved during the year.

It measures the development outcomes of all government programmes. Which means that if you want to find out whether some money allocated for, say, the building of a school or a health centre has actually been given, you might be able to. It will also tell you if the money has been spent for the purpose it was sanctioned and the outcome of the fund-usage.

The Outcome Budget, however, will not necessarily include information of targets already achieved.

This method of monitoring flow of funds, implementation of schemes and the actual results of the usage of the money is followed by many countries.

How will it change the way the government works?

The Outcome Budget, to be presented for the first time, will discipline various ministries in their spending by ensuring that they do not stagger it towards the last quarter of the fiscal.

The Outcome Budget is also aimed at changing the outlook of the government officials. The idea is to make government representatives more result-oriented and keep them from delaying projects and asking for more expenditure to meet the spiraling costs. The focus will shift from 'outlays' to 'outcome.'

It helps the government make its budgets more cost effective, doubles up as a major device to fix accountability, and the government manages its schemes better.

The Congress-led United Progressive Alliance government has decided to release information on spending by various ministries for public scrutiny. This will ensure that everyone: people's representatives, the press, and those for whom the scheme is being implemented can check for themselves how well a project has been implemented. It thus gives the government more bang for its buck.

The Outcome Budget will also help gauge the effectiveness of the money spent on various heads by different ministries. It will also help ensure that programmes and schemes do not continue indefinitely from one Plan period to the next, without an independent, in-depth evaluation.

The Outcome Budget is expected to ensure efficient service delivery, transparency and accountability.

Which schemes will be under Outcome Budget?

For starters, all Plan schemes will come under the Outcome Budget as it is much simpler to associate expenses with the results achieved in such development programmes.

Plan expenditure is an expenditure that the government plans to incur on a scheme to be implemented in a given year. For example, in the year 2003-04 (as per the revised estimates for that year), the government had allocated Rs 2,588.62 crore (Rs 25.886 billion) for construction of national highways. This expenditure that was incurred for construction of national highways came in as a part of Plan expenditure.

However, the finance minister has said that from the next year, the expected outcomes for non-Plan expenditure too would be listed.

Non-plan expenditure is defined as expenditure committed by the expenditure. Interest payments, pensions, salaries, subsidies and maintenance expenditure are all non-Plan expenditure. Non-plan expenditure is generally an outcome of plan expenditure. For example, the national highways the government constructed in the year 2003-04 and before, need to be maintained. All the expenses going towards this is treated as non-Plan expenditure.

How will the ministries go about this exercise?

From the fiscal year 2006-07, Outcome Budget will be part of the main budget.

Every ministry will present a preliminary Outcome Budget at the time of demanding grants from the finance ministry for any scheme. This will help the government examine the expenditure before it is made, instead of doing a post-expenditure inspection. So at the very stage of planning a programme there will be a mechanism of checks and balances. This will result in reducing unnecessary expenses.

All ministries have already sent their Outcome Budgets and the finance ministry has compiled them.

How will performance be gauged?

While it is relatively easy to check if defence ministry has spent its allocated funds or budget to buy new weapons system, it is much harder to figure out how a particular sum spent on a village helped lift the rural community there above the poverty line.

But some yardsticks that are used to check whether implementation has been good or poor is by standardising performance indicators like unit cost of delivery, the quality of outcomes, capacity for required efficiency in terms of equipment, technology, know-how and expertise.

Who will monitor this exercise?

The finance ministry, together with the Planning Commission, will keep an eye on whether the desired results are being achieved vis-à-vis the money being spent on a particular scheme.

A Programme Outcome and Response Monitoring Division, under the Planning Commission, will help coordinate the Outcome Budget.

The Outcome Budget, after it is presented in Parliament, will also be put up on the finance ministry's Web site for the public to comment on it.