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Program and Performance Budgeting in India

2003 -2008 || U.S. Agency for International Development

Abstract

The USAID-funded India State Fiscal Management Reform Project (REFORM) worked with the Government of Jharkhand (GoJ) between 2003 and 2009 to improve its overall fiscal management. At the request of the GoJ, the REFORM project was focused on introducing Program and Performance Budgeting (PPB) to state nodal departments, including the departments of health. This intervention was necessary to help improve the transparency and accountability of its annual budgeting process and to more effectively link results to budgetary obligations. Over 80 health service personnel in 23 districts of the state received training in performance budgeting.

The Challenge

The decision of the Government of India (GoI) to introduce Outcome Budgeting techniques required state governments to change the way their budgets were being prepared and presented. To this end the GoJ needed to develop its budget preparation capacity, as well as examine the systems under which budgets were currently being prepared and how the system could change to help facilitate the new procedures in a transparent and accountable way.

How We Helped

Deloitte worked closely with the GoJ by providing information and resources to help them implement the Program and Performance Budgeting (PPB) approach within their state budgeting activities. This budgeting technique, which is considered an internationally recognized best practice, helped the GoJ in its efforts to achieve a number of critical state goals:

  • Prioritizing the allocation of funds based on acceptable program outcomes;
  • Encouraging more effective program monitoring and evaluation through the budget process; and
  • Improving public transparency and accountability by presenting the above information in the budget document

An ambitious PPB roll-out plan was initiated in July, 2005 in Jharkhand with the goal of having at least a third of the state budget (both plan and non-plan) prepared in this manner by Fiscal Year (FY) 2007-08. In 2005, two pilot departments received training in PPB methodology and they prepared their FY 2006-07 budgets in the PPB format. Ten additional departments prepared budgets for FY 2007-08 using the skills received from REFORM project training workshops. To date, approximately 129 senior and middle level officials have been trained in PPB methodology. In addition, a PPB manual has been prepared and is in use by PPB Task Forces in these 12 GoJ nodal departments.

This significant progress has been possible due to the keen interest of the Finance Department, and Department of Health. The inaugural workshops during both years were attended by the Principal Finance Secretary and a number of Secretaries and other senior government officials. Some of the opinions expressed by GoJ officials on the PPB budgeting approach follow:

  • Participant 1: “If the state government adopts this particular approach, we will be talking in same language.”
  • Participant 2: “This type of budgeting will improve the quality of our budget exercises. They will be [easier] to monitor and the people will know …better what we are doing with their tax money.”

Solution

As a result of this PPB, the budgetary practices in the State began shifting their focus from projected outlays to actual outcomes. The new PPB-compliant budgets produced by the GoJ allowed more efficient transparency in public budgeting, helped provide government officials with clear performance measures (outcomes) against which they could measure their progress, and helped allow decision makers to more clearly articulate their goals and objectives as well as the outcomes the public can expect from the state government. More importantly, the REFORM project worked closely with the GoJ to help realize the following achievements:

  • For the past three years, the GoJ has issued annual budget circulars requiring preparation of departmental budgets using the PPB methodology, which has helped to institutionalize the process at the state level;
  • Based on a strategic GoJ decision, it has extended PPB to as many state-level departments as possible. As a result, 39 out of the 42 GoJ departments, covering more than 90 percent of the budget, now have the ability to prepare PPB documents in the prescribed format which can allow them to track and more effectively manage the use of public funds;
  • The GoJ now has a pool of more than 75 government officials at different levels who received training in the PPB methodology, a number of these officials have become trainers and mentors who can help extend the PPB approach to the district and city government levels;
  • There is now a pool of a dozen (12) officials available to the GoJ who are serving as mentors, resource persons, and trainers at the State Institute of Rural Development and the Shri Krishna Institute of Public Administration as well as other departments of the state government; and
  • The GoJ now has a PPB manual that is being used as a training tool for its annual courses delivered to Jharkhand Public Service Commission cadre.

The cumulative effect of these results has been an improvement in matching budget outlays to program outcomes in order to more effectively track public service delivery, identify budget over- or under-allocations, and generally help improve the quality of expenditure and health activities within the GoJ.

As used in this document, “Deloitte” means Deloitte Consulting LLP, which provides strategy, operations, technology, and human capital consulting services, Deloitte Financial Advisory Services LLP, which provides financial advisory services, and Deloitte & Touche LLP which provides governance and risk oversight and reporting advisory services. These entities are separate subsidiaries of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.

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