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.
Topics: GS-III: Indian Economy Issues Relating to Planning • GS-III: Economic Growth Development • GS-III: Government Budgeting