India toying with budget reforms

End of a 90-year old journey for Indian Rail Budget

India is all set to scrap the Railway Budget, introduce outcome-based budgeting and present a separate farm budget.

This is on the lines of Prime Minister Narendra Modi’s vision of ‘minimum government’ and ‘maximum governance’.

Railway budget was introduced in India after a committee headed by William Acworth, a railway expert and committed member of the Conservative party of Britain, had recommended splitting up the accounts documents of the Government of India and the Indian Railways in 1921.

Very soon, the Union Finance Ministry is set to make a presentation on the major reforms in the Federal Budget to PM Modi.

Every year Federal Budget is discussed and decided on the last working day of February. This is preceded by the presentation of Economic Survey, Railway Budget and General Budget a day earlier.

The National Institution for Transforming India Aayog, or Niti Aayog which replaced the Planning Commission recommended the scrapping of Railway Budget.

A 20-page note titled ‘Dispensing with the Rail Budget’, jointly authored by Niti Aayog, had argued that a separate budget has only led to politicisation of railway affairs. Also it failed to ensure time-bound implementation of railway projects.

The Finance Ministry has to find ways to take over the liabilities of the Railways including the pension liability which has gone up after implementation of the 7th Pay Commission. For Railways this is a win-win situation as it expects to save INR 10,000 crore it pays as dividend to the Central government.

Outcome based budgeting

Other reforms that could be proposed in the Federal Budget include switching to outcome based budgeting instead of merely presenting the revenue and expenditure plans.

Outcome budget is all about transparency and fixing responsibilities on various ministries who are responsible for implementing schemes and projects. It involves planning expenditure, fixing appropriate targets and quantifying the deliverables for each of the central schemes.

In tune with PM Modi’s vision of doubling farmers’ income by 2022, India could present itself a special budget on agriculture as well. However, it is believed to take some time to be effected and will be presented only in 2018.

The agriculture budget is currently being discussed in various central ministries. The initiative could give a push to shrinking agricultural sector and boost farmers’ income. Already states such as Madhya Pradesh and Karnataka started the practice of presenting a separate agriculture budget. As a result, it has boosted farmers’ income in these states.