Government unleashes bold budgetary reforms

Government unleashes bold budgetary reforms

By SHAILENDRA TYAGI | New Delhi | 24 September, 2016
The reforms aim at doing away with complications that haunt our budget-making.

The Union Cabinet’s approval to advance the budget presentation by about a month, merge the rail budget with the general budget, besides doing away with plan and non-plan classification of expenses, are landmark budgetary reforms aimed at doing away with complications that haunt our budget making exercise. The merger of the rail budget with the general one is likely to increase the size of the general budget by over Rs 3 lakh crore, the amount that the railways had planned to spend on its plan and non-plan expenditure this year. All the approved steps would kick in from the next financial year beginning April 2017. Although the railways would still have autonomy to fix passengers’ fares, many feel that such issues would now be decided in the larger domain “It would hopefully pave the way for the setting up of a regulator to take on such decisions,” feels Sunil Sinha, principal economist with India Ratings & Research. Stakeholders hope that the approved steps would not only un-complicate the entire process “but would also improve the way accountability is sought from top to bottom,” according to Sinha.

Analysts feel that the decision to subsume the rail budget with the general budget is a welcome step because the rail budget, more than often in the past, was used as political instrument to obtain certain objectives which usually had long term implications on the operational efficiency of the railways.

Though the advancement of the budget presentation (probably by a month) is not going to make much of a difference, yet the government claims that such advancement would certainly help and enable ministries and departments to ensure better planning and execution of schemes from the beginning of the financial year that would still begin on 1 April.

Analysts feel that the decision to subsume the rail budget with the general budget is a welcome step because the rail budget, more than often in the past, was used as political instrument to obtain certain objectives which usually had long term implications on the operational efficiency of the railways. But with this unification, that discretion of doling out freebies would certainly not be there. This would minimise the distortions that have almost crippled the financial backbone of the railways. The Indian railways remain the largest passenger carrier in the world. Globally, it is also the fourth largest freight carrier.

But with the Railways’ financial autonomy now shifted to north block, how much room would such a shift leave for railways to exert its operational autonomy is yet to be seen. Many fear that populist measures like announcement of a new train, or one related to passengers fares (till the regulator is set-up) may now actually be dictated by the Ministry of Finance. Doing away with the redundant classification of Plan and non-plan expenditure is a welcome step which would make life easy both from operational as well as from an accounting perspective. Moreover, with no “Planning Commission” in place, such classification looks irrelevant.

 

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