The 2017-18 fiscal budget to be presented by the Yogi Adityanath government on Tuesday will have the clear stamp of the NITI Ayog as the plan and non plan classification of expenditure will be replaced with more universally recognised capital /revenue divide.
The Centre in 2014 had abolished the Central Planning commission and replaced it with NITI Ayog. Centre has already scrapped the 92 year old practice of introducing separate general and railway budgets from the current fiscal.
The aim of the classification of expenditure between revenue and capital is to ensure that governments’ cash flows are balanced over an economic cycle, and the government borrow only to invest and not to meet routine expenditures. The Centre in 2016 had advised the states to make a similar shift by doing away with the Plan and non-Plan distinction.
At present, non-Plan expenditure constitutes approximately 70-75 percent of the gross expenditure at central and state levels. Even in the Plan section, the revenue expenditure component accounts for 70 percent of the expenditure, puncturing the impression that Plan expenditure leads to creation of capital assets.
With the plan and non plan expenditure losing clarity the economists have for long argued that Plan and Non-Plan classifications should be done away with and the focus should be on improving the quality of government spending by focusing on the end use of the funds.
In 2010, a panel led by the former RBI governor C Rangarajan had also suggested doing away with the artificial classification. Plan or capital expenditure, denotes the more productive use of government resources as investment in various programmes and schemes, but forms a small chunk of the total spending bill. Non-Plan expenditure, on the other hand, is the majority of the government’s committed expenditure on payment of salary, pension and debt servicing.
The Constitution mandates distinguishing between revenue and capital expenditure, but it does not say anything on the categorisation of Plan and non-Plan, which was adopted by the government for superficial functional classification later.
The finance department sources here said the abolition of the artificial divide of plan and non plan will go a long way in ensuring financial discipline and it will also put a curb on the tendency of the political executive to announce populist scheme without due diligence.
“Earlier large number of schemes were introduced on the plan side of the budget to inflate the plan outlay with the aim of claiming a bigger share in special central assistance thus adding to the debt burden on the state without any substantial gains for the state’s economy and the people’’, said an official of the finance department.
Citing an example of the health scheme for the elderly people the official said `` during Mayawati regime in 2009-10, a health scheme for the free treatment of the persons with above 70 years of age was introduced and a fat provision was made in the budget of the health department. No measures were undertaken to identify the targeted beneficiary and not a single penny was spent from this scheme yet the then BSP government sent the message to the people that it cares for the elderly people’’.
Moreover the sources said the end of plan and non plan classification would eliminate the problem of the PlA (Public ledger Account) where the unutilised money for the development projects and schemes was transferred to the PlA by the heads of department and the district magistrates at the end of the financial year.
The end of the old classification of expenditure in the budget will also bring down the number of transaction in district treasuries on account of payment of salaries to the employees. Earlier the salary of the employees in one department were paid from different heads of expenditure for different schemes. From the new budget there will be only one head for the drawl of the salary in each department.
last but not the least, the end of plan and non plan divide will end the malaise of the reappropriation of the grants in the budget or transferring the money from the plan head to non plan and then the public money was spent as per the whims and fancies of the Babus. This led to the mad rush in all the government departments during the last week of the financial year for `utilisation’ of the budget—which is better known as ``March loot festival’’ in UP. Chief minister Yogi Adityanath in his first interview after taking over as chief minister had expressed his utter surprise saying ``his office was flooded with thousands of files for his approval on the last days of march this year’’.