Transcript Budget Documents

Public Policy Design & Operations
Coherence & Convergence
Government Economists at work : OR What is the value addition of IES ?
Concerns of Equity, Efficiency, Security,
Fairness, Privacy & Accountability
(Knowing, Understanding, Application & Skills)
Facts vs. Fiction
A
Presentation
to
Probationers of Central Services
at
Dr. MCR HRDI AP
29th October, 2012
Role of government ?
A provider or enabler in….
Creating wealth?
Delivering welfare?
Disclosing entitlements?
Defining empowerment?
Determining property rights?
Qn: How significant is the initial endowment ?
Issues: Problem recognition, measurement, diagnosis,
solution and implementation
What we do at work ?
simplify, supplement, support, standardize ! sabotage ?
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We take decisions w.r.t to Legal framework
We help others to take decisions
We correct others’ mistakes in their decision
We communicate decisions
We implement decisions
We finance decisions & implementation
We audit decisions & operations
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We spend money & raise funds via tax or debt or aid
We dispense power to empower or disempower others
We match resources used with Results
We need information, analysis, and arguments & not rhetoric
Complexity, conflict of interests and
moral hazard
Citizen:
How to get more from Government by paying less
Vs.
Government:
How to give more to citizens
while taking more from them, and also
balancing special interest effect and
shortsightedness effect
Discussion point: Reactions to policy solutions & reforms
Perversity thesis: Futility thesis: Jeopardy thesis
Policy process cycle
consultation
coordination
Policy
instruments
Decision
Policy
analysis
implementation
Identifying
issues
Evaluation
Issue: Policy cycle being neither a logically, sequentially, structured or a uniform process..
Sourced from Australian Policy cycle model
http://www.premiers.qld.gov.au/About_the_department/publications/policies/Governing_Queensland/Policy_Handbook/cycle/cycle/at
Public Policy Issues
w.r.t distribution of
Benefits
Widespread
Concentrated
Widespread
Type 1
Type 2
Concentrated
Type 4
Type 3
Costs
Challenge is in evolving options that yield widespread benefits with widespread costs transparently.
Risk is in defining, measuring, and ensuring the spread of the costs and benefits unambiguously.
Issues: impact on visible voters, future voters, unborn voters, influential voters, indirect voters
Productive Functions: Efficient action produces more benefits than costs for the individuals of the economy
Inefficient action produces more costs than benefits to the individuals of the economy
(Issues: externalities, public goods, information problems, unintended consequences )
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Protective Functions: Maintenance of a framework of security and order i.e., rules, institutions, property protection,
contract enforcement, market regulation, social security, pensions, investor protection, administration of justice
Some key Principles in Public Policy
• What belongs to you, you tend to take care of; what
belongs to no one or everyone tends to fall into disrepair.
• Sound policy requires that we consider long-run effects
and all people, not simply short-run effects and a few
people.
If there is vagueness or subjectivity in the terms and conditions inviting tenders it may result
In unequal and discriminatory treatment. It may violate doctrine of level playing field –
Supreme Court of India on 17th Sept, 2007 in Reliance Energy case relating to Mumbai Trans-Harbour Sea link Projects
Key issues: Equity, Efficiency, Effectiveness, Economy, Entitlements
Ref: CAG’s Performance Audit Guidelines, and UK Government Green Book
Key Principles
• Nobody spends somebody else's money as
carefully as he spends his own.
• Government has nothing to give anybody except
what it first takes from somebody, and a
government that’s big enough to give you
everything you want is big enough to take away
everything you’ve got.
Budget & the Citizen
Railway budget is separate, but Constitutionally, Railway receipts are part of CFI
Not on
Constitutional
strength
but by practice
Non
Tax
Revenue
Four*
Services
b
Tax
Revenue
N
O
N
P
L
A
N
c
a
4
States
CFI
Other
Receipts
P
Market
Borrowings
S
U
citizen
3
P
L
A
N
Grants
/Donor
support
S
g
R
E
V
E
N
U
E
1
C
A
P
I
T
A
L
d
Interest
receipts
2
f
Loan
repayment
Depts.,
e
Application of Funds
Consolidated
Fund Of India
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7/7/201502/07/07
*Economic Services
Fiscal Services
Social Services
&
Other General Services
Indian Structural Reforms
1.
2.
3.
4.
5.
Liberalization and regulation of specific markets
Trade Liberalization
Public Sector Management
Restructuring and privatizing utilities
Public expenditure reforms - economy, efficiency,
transfers, user charges
6. Tax reforms
7. Public debt management
8. Monetary policy –Central bank independence
9. Financial Sector Reforms
10. Private and Public Governance Reforms
11. Decentralization and intergovernmental reforms
12. Civil Service Reforms
13. Land Reforms
14. Labour Reforms
Issues: Is market
necessary for Regulations
democracy: Democracy and Market system = Mass control over elite:
15.system
Environmental
Collective outcome Vs. Market outcome.
Government decision makers are like ordinary decision makers in market: influenced by their interests and bias
but work in different incentive structure. ( eg: Distribution of income and power)
Legislative Objective of fiscal responsibility
and budget management
“To Provide for the responsibility of the Central Government to
ensure inter-generational equity in fiscal management and
long-term macro-economic stability by achieving sufficient
revenue surplus and removing fiscal impediments in the
effective conduct of monetary policy and prudential debt
management consistent with fiscal sustainability through limits
on the Central Government Borrowings, debt and deficits,
greater transparency in fiscal operations of the Central
Government and conducting fiscal policy in a medium term
framework and for matters connected there with or incidental
thereto.”
7/7/2015
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Goods and Services
(Reform policy challenge is to move right goods/services in the right box at a right time)
Paid for by
Consumer
purchaser
A
P
R
O
D
U
C
E
D
B
Y
Private
Enterprise
B
Apples, Oranges, TVs,
Housing, Food, Clothing,
Bollywood films, private
schools, medicines
D
Government
Enterprise/
Contracting
Tax payer or
3rd party
Food through PDS, Oil,
Gas, Supporting Private
Schools, CGHS, BPL
insurance
C
Posts, Rail, Water,
Electricity, toll roads,
Hospital services, Public
transport
National defence, Law &
Order, Administration of
Justice, Public Schools,
Universities, Highways
(non-toll), Debt
Transparency & Public Policy
• Transparency can help reduce the scope for discretion
since decisions are more likely to be reached on the
basis of observable data and replicable methods, and
poor decisions will be more open to challenge.
• Transparency can also increase the legitimacy of
decisions, thereby reducing the risk of future policy
reversals (anticipation of which will tend to undermine
the intended response).
• Transparency works even when incentives can’t
Implementation challenges
or
Political economy considerations
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Not being sensitive to the view of the majority
Free riding
Coordination failure
Information failure
Status- quo bias
Time Inconsistency.
Thank you
Questions
Comments
Suggestions
[email protected]
or
[email protected]
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GDP &
Fiscal Indicators
Y=C+I+G+(X-M)
• GDP: Gross Domestic Product
– indicates annual national wealth production
added at every stage of production of goods & services:
(value
CSO brings out
Advance, Quick and Quarterly estimates)
• Economic Growth
-
GDP Growth: indicates how fast a nation is getting richer
(Real Vs. Nominal Growth & WPI)
Issues:
What causes higher GDP growth - Increase in Output:
What causes increase in Output – Increase in productivity & employment:.
What causes increase in productivity – increase in efficiency.
What cause increase in efficiency - enhanced/effective technology & raised skills:
What raises investment and skills - Creative people with money;
How to do that - Help more people to be creative & help them to have access to more money. 16
(Note: The above slide and issues are framed using publicly available sources)
GNP = Cp+Ip+G+X-M = Cp+Sp+T+R
(Ip-Sp)+(G-T)=(M-X+R)
•Large prolonged deficit lead to external
current account imbalance
•Fiscal policy impacts savings and
investments of private sector
•Budget deficit respond and influence
external balances
Cp-private consumption; Ip-private investment; G-government spending; X-exports of goods and
services; M-imports of goods and services; Sp-private savings; T-government revenue; R=net17
current transfers to abroad.
Budget performance Concepts, Systems/Management styles
Costs
Traditional Budget
V
A
L
U
E
For
M
O
N
E
Y
Economy
E
C
N
O
M
I
C
A
L
L
Y
E
F
F
I
C
I
E
N
T
inputs
Technically
efficient
processes
Output focused
Budget
outputs
Effectiveness
Outcome focused
Budget
outcomes
7/7/201502/07/07
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Source; IMF Occasional Paper 245
Budget & the Constitution
AFS- Anchor to all documents: Art 112
Trigger to
All Documents
While the following provide for
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Procedure in Parliament with respect to Estimates
… 113
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Appropriation Bills
… 114
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Supplementary, additional or excess grants
… 115
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Votes on account, votes of credit and exceptional grants
… 116
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Special provisions as to financial Bills
… 117
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Consolidated Fund
…
…
… 266
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Contingency Fund
…
…
… 267
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Finance Commission
…
… 280
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Expenditure defrayable by the Union out of its revenues
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Laws/Rules for Custody, etc., of Consolidated Funds,
Contingency
…
…
… 282
Funds and moneys credited to the
public accounts
•
…
…
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Borrowing by the Government of India
… 283
… 292
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*Annual Financial Statement
…a stylized peep into the Budget
(excluding charged estimates)
• Objectives
– in Spending, Taxing, Balancing, Investing, Macro-economic
stability, growth & global positioning
• Risks & leaks
– in pass-thru of public money;
– contingent liabilities eg: guarantees, PPP terms, legal liabilities
• Transfer payments
– transfer objectives, transferring routes, vs. Operational issues
• Impact on equity*, efficiency** & entitlements***
*Intergenerational. Regional. Public Vs. Private sectors, Farm & non-Farm sector.
Rural Vs Urban. Spenders Vs. Savers. ** Capital Vs. Revenue. Productivity (ICOR)
***States Vs. Union Government. Through Finance Commission’s recommendations.
BPL Vs. APL. Children & Aged. Women Vs. Others
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Together – the Budget Documents…
…reveal Government resources flow & ...
… Answer the questions like:
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Whether the results matched with the resources used ?
•
How much money will go to health, education, pay, pensions, poverty
alleviation, interests payments, defence etc., ?
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How much money will go for research & development ?
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How much money will go to pay down the debt ?
•
Will taxes go up or down ?
•
How much money will be borrowed ?
•
What is the fiscal impact of all this ?
7/7/201502/07/07
Would you like to try few more questions ?
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India’s FRBM Act – Managing The Mandate
Legal Frame work
Constitution, FRBM Act, Public Debt Act, etc.,
Borrowing by the Government of India - Art. 292
The executive power of the Union
extends to borrowing upon the security of the
Consolidated Fund of India
within such limits, if any,
as may from time to time be fixed by Parliament
by law and to the giving of guarantees within
such limits, if any, as may be so fixed.
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References:
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15.
http://nobelprize.org/nobel_prizes/economics/laureates/1986/buchanan-lecture.html
http://cag.nic.in/html/publi_peraudguid-rc.htm Performance auditing
http://www.hm-treasury.gov.uk/media/5/D/Green_Book_07.pdf (Green Book)
http://www.imf.org/external/pubs/ft/fandd/2000/12/robb.htm (How can poor have voice in
policy analysis)
http://poverty2.forumone.com/files/12685_PSIA_Users_Guide_-_Complete__High_resolution_-_English_-_May_2003.pdf (A user’s guide to poverty and social impact
analysis)
http://siteresources.worldbank.org/EDUCATION/Resources/2782001099079877269/547664-1099079934475/5476671135281504040/tools_ED_policy_analysis.pdf (Tools for education policy analysis)
http://www.mackinac.org/archives/2002/sp2002-01.pdf (Seven Principles of Public Policy)
Simon Blackburn: Being Good; A short introduction to Ethics
World Bank, The Impact of Economic Policies on Poverty and Income Distribution;
Evaluation Techniques and Tools
James D. Gwarthney et al: Macroeconomics Private & Public Choice
Mancur Olson Jr. The Logic of Collective Action Public Goods and the Theory of Groups
IMF, Unproductive Public Expenditure: A Pragmatic Approach to Policy Analysis
Deborah Stone, Policy Paradox, The Art of Political Decision Making
Anthony Weston, A Rulebook for Arguments
Eugene Bardach, A Practical Guide to Policy Analysis: The Eightfold Path to More
Effective Problem Solving
Small savings: Flow of funds/returns to citizens through NSSF: Sharing of returns/risks/costs Vs.alternatives
2
3
2
7
4
8
States’
CFI
5
Post Offices /
Agents
1
NSSF
Open the Scope
To reduce
Tax payers’
burden & to
raise
NSSF’s
Efficiency
equity
Why
&
How
8
9
7
6
5
6
2
2
Union’s
CFI
Numeral indicates the sequence: Arrows indicate the direction
L
e
g
e
n
Funds: 2,4,5
Taxes: 2
Scope blocked
d
Securities: 1,3
Principle
Interests: 7,8
Scope open !?
Commissions: 9
Admn. Costs
Losses; 6
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