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.

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.

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.