Syllabus: GS2/ Polity and Governance
Context
- A Parliamentary Standing Committee on Finance report has criticized the Ministry of Planning and NITI Aayog for underutilisation of funds and poor financial management, with spending falling below 36% in FY24 and FY25.
What are Parliamentary Standing Committees?
- Parliamentary Standing Committees (PSCs) are permanent committees of Parliament constituted to examine, scrutinise, and oversee the functioning of the executive.
- These committees continue to function throughout the year, unlike ad hoc committees which are temporary.
- Types of Parliamentary Standing Committees:
- Department-Related Standing Committees (DRSCs): It examines demands for Grants of ministries, bills referred to them and policy issues. Example: Parliamentary Standing Committee on Finance
- Financial Committees: Public Accounts Committee (PAC), Estimates Committee and Committee on Public Undertakings.
- Other Standing Committees: Business Advisory Committee, Committee on Privileges and Rules Committee.
Role of Parliamentary Standing Committees
- Detailed Financial Scrutiny Beyond Parliament: Parliamentary debates often lack time for detailed examination of budgetary provisions.
- Standing Committees undertake granular scrutiny of Demands for Grants, expenditure trends, and utilisation patterns.
- Evidence-Based and Non-Partisan Oversight: Committees function in a non-partisan manner, relying on expert inputs and data-driven analysis. Their reports provide objective evaluation of policy implementation and fiscal discipline.
- Monitoring of Executive Functioning: Committees operate throughout the year and ensure continuous oversight over ministries and departments. This enhances transparency and accountability in governance.
Challenges in India’s Budgetary Forecasting and Utilisation
- Unrealistic and Inflated Budgetary Forecasting: Ministries often project expenditure requirements without realistic assessment of implementation capacity.
- The continuous rise in allocations despite poor utilisation reflects weak forecasting mechanisms.
- Underutilisation of Allocated Funds: There exists a significant gap between Budget Estimates (BE) and Actual Expenditure (AE). Underutilisation leads to idle public resources and delayed developmental outcomes.
- Incremental Budgeting without Outcome Orientation: Budget allocations continue to rise annually without linking them to past performance or outcomes.
- This reflects the dominance of input-based budgeting rather than outcome-based budgeting.
- Fiscal Indiscipline: Ministries resort to excessive spending in the final quarter to exhaust allocated funds. Such spending violates Quarterly Expenditure Plan (QEP) norms and fiscal prudence principles.
Way Ahead
- The observations of the Parliamentary Committee reaffirm its critical role in ensuring executive accountability and fiscal prudence.
- Strengthening outcome-based budgeting, adherence to QEP norms, and integration of policy with finance is essential for improving governance outcomes and restoring credibility to India’s fiscal framework.
Source: TH
