Examine the need of multi-year budgeting in the context of India.

India has been facing many issues in budgetary resource allocation, budget preparation and implementation. Multi-year budgeting is one of the areas being discussed as a solution.

Pros of multi-year budgeting:

  • Long term policy predictability.
  • Reduced populism due to infrequent changes.
  • Focus clear to private sector, hence investment increase.
  • Foreign players attracted due to long-term gains.
  • Ease in monitoring and completing targets through target-based allocation and fund release.
  • Reduce ‘March Rush’ and inefficient expenses.

Cons of multi-year budgeting:

  • Unable to incorporate dynamic year-on-year changes.
  • Will become lacklustre due to long term gestation period.
  • Implementation is challenging because of an entirely new concept.
  • Government changes every 5 years in India hence predictability will be in danger leading to volatility.
  • Policy formulation suffers because of yearly allocations being avoided.

Multi-year budgeting can be a prospective approach. However, there needs to be a pilot run and efficiency determination before bringing it at full scale. Randomized uncontrolled trials can be a way to try it on small scale.

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