Outcome Budgeting

• Context (DTE): Need for Sustainable Development Goals (SDG) linked outcome budgeting in India.

• Prioritising SDG goals will help India tackle several emerging challenges, like the impacts of climate change, increasing inequities, and lagging human development indices.
• Timely access to sufficient financial resources is important for achieving SDG. So, it is important to have outcome-oriented budgeting in the country.
• Assam’s utilisation of Outcome-Based Strategies (OBS) aligned with SDG outcomes serves as a noteworthy example.

What is outcome-oriented budgeting?

• It is a way of planning and managing money where the focus is on achieving specific results or outcomes rather than just spending money on various activities.
• It helps ensure that resources are used efficiently to achieve the intended goals and bring about positive changes in society.
• Fundamental to understanding this type of budgeting is the difference between outputs and outcomes:
  • Outputs are the goods and services that governments produce or provide.
  • Outcomes are the impact or consequences of the outputs for the community. E.g, Swachh Bharat Abhiyan.
  • Outputs: Construction of a specific number of toilets.
  • Outcomes: Improved public health due to reduced open defecation.
• Outcomes of programmes are measured not just in terms of rupees but also in terms of physical units like kilowatts of energy or tonnes.
• Also, outcomes are expressed in terms of qualitative targets and achievements to make the technique more comprehensive.

  

Procedure of outcome-based budgeting

• The concept of outcome budgeting was introduced in India in 2005.
• Under outcome budgeting, each Ministry presents a preliminary Outcome Budget to the Finance Ministry, which is responsible for compiling them.
• The Outcome Budget becomes a progress card on what various Ministries and Departments have done with the outlays in the previous annual budget.
• From 2007-08 onwards, the previous Performance Budget was merged with the Outcome Budget.
• Around 11 Indian states have started following the practice of formulating their OBSs in the past few years.

Significance

• Better service delivery.
• Effective Decision-making.
• Evaluation of programme performance and results.
• Communicating programme goals.
• Improving programme effectiveness.
• Make budgets cost-effective.
• Fix accountability.
• Aid better scheme management.

Challenges

• Lack of political ownership.
• Linking funds with performance may result in additional costs.
• Cultural change is required in central agencies to move from compliance-based management to outcome-based management.
• The process of identifying outcomes may become problematic.
• Unpreparedness for the enhanced accountability in government agencies.
• Poor accounting and IT systems that don’t support the reform.