The public expenditure management is a challenge to the Government of India in the context of budget…

Question

The public expenditure management is a challenge to the Government of India in the context of budget making during the post-liberalization period. Clarify it.

Ghissu Editorial · Accepted Answer

Post-1991 budget making must fund growth and welfare within deficit limits, but committed spending, subsidy shocks, off-budget borrowing and weak scrutiny make expenditure management hard. Capital expenditure rose from 1.5% of GDP in 2017-18 to a budgeted 3.1% in 2026-27, improving spending quality.

**Introduction**

The 1991 crisis was at root fiscal, and liberalisation made expenditure management the core of budget making. Though the fiscal deficit fell from 9.2% of GDP in FY21 to 4.8% in FY25 (Economic Survey 2025-26), the quality of spending remains the challenge.

**Why Expenditure Management Became a Challenge After 1991**

SKETCH: iceberg | Behind the Headline Deficit
visible: Fiscal deficit target, Capex headline
hidden: Interest burden, Pension and salary bills, Off-budget loans, Contingent liabilities

1. **Committed spending**: Interest, salaries, pensions and subsidies pre-empt most revenue, interest alone taking roughly a quarter of Union spending.
2. **Fiscal rules versus needs**: Under the FRBM Act, 2003 and the N.K. Singh Committee's debt anchors (2017), capital spending was cut first in lean years because it is easiest to defer.
3. **Subsidy and populism pressures**: Food, fertiliser and fuel subsidies swing with global prices, and pay commission awards add permanent obligations.
4. **Off-budget opacity**: NSSF loans to FCI hid food subsidy until the 2021-22 Budget brought it on the books.

**Budget-Making Reforms and Persisting Gaps**

1. **Capex shift**: Capital expenditure rose from 1.5% of GDP in 2017-18 to a budgeted 3.1% in 2026-27.
2. **Process reforms**: Merging plan and non-plan spending in 2017 and the Output-Outcome Framework shifted focus to results.
3. **Weak execution and scrutiny**: The CAG found Rs 1.96 lakh crore unspent in 2022-23, and about 80% of the budget passed without discussion in 2019-23 (PRS).

**Way Forward**

1. **Outcomes and transparency**: Link allocations to outcomes evaluated by NITI Aayog's DMEO, expand DBT, and disclose all off-budget borrowings.
2. **Parliamentary scrutiny**: Strengthen departmental committees so fewer demands are guillotined.

**Conclusion**

Controlling the deficit has proved easier than improving what each rupee buys. Outcome-focused, transparent spending turns fiscal discipline into growth.

The public expenditure management is a challenge to the Government of India in the context of budget making during the post-liberalization period. Clarify it.

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