People’s Budget Initiative (PBI) recognizes the fundamental challenges in the sphere of governance in India, which do affect the institutions and processes relating to government finances in the country. In this context, we believe that:
- Mechanisms of accountability of the government for budgets, both towards people’s representatives in Parliament and State Legislatures and towards people themselves, need to be strengthened;
- Transparency in government budgets at all levels, viz. national, state, district, and sub-district levels, needs to be improved significantly; and
- Participation of people (especially, representatives of disadvantaged sections of population) in the processes of setting up budgetary priorities at all levels needs to be promoted and institutionalised.
In addition to this, we recognize the fundamental problems in the overall fiscal policy framework in the country, and, believe that:
- The overall scope for government intervention, as compared to the size of the country’s economy, is much less in India than that in most developed countries and a host of developing countries primarily because of India’s low level of tax-GDP ratio. Hence, the country’s tax-GDP ratio needs to be stepped up significantly in the coming years.
- India’s tax system lacks progressivity as it relies heavily on indirect taxes and much less on direct taxes; hence, the government should focus on improving the country’s tax revenue collection from proper implementation of the existing direct taxes and progressive reforms in the direct tax regime instead of increasing its reliance on indirect taxes.
- The government should expand the scope of budgets (i.e. the Union Budget and State Budgets combined) as compared to the size of the country’s economy based on an improvement in the country’s tax-GDP ratio, and pursue a re-prioritization of budgets in favour of critical sectors and development of disadvantaged sections of population. Such a fundamental change in the fiscal policy framework of the country would be required to address the problems of inadequate coverage and poor quality of public provisioning in most development sectors, which are rooted in the acute shortage of financial resources for these sectors for decades now.
- Government budgets need to be a lot more responsive to the needs and challenges confronting the disadvantaged sections of population; the programmes and schemes need to be designed in such a way that they address the causal factors underlying the disadvantages of children, women, dalits, adivasis, religious minorities, persons with disabilities, and unorganised workers.
- Fiscal policy pursued by the Union Government and the State Governments should not promote ad hoc, short term policies for development sectors for the sake of cost effectiveness; the government should make long term commitments for adequate public provisioning in all critical sectors, which should reflect in budgets. Such a correction in the fiscal policy in our country is necessary now to address the acute systemic weaknesses that have come up in many sectors.
Fiscal policy in the country should promote substantive decentralization, from the Union Government to State Governments and from State to Local Governments. In this regard, the institutions and processes of planning and budgeting at the sub-national levels need to be strengthened, and the system of budgeting in the country should provide adequate scope for addressing locally felt needs in different regions.