Rameshwar's IAS

Budgeting for the Economy

Tags: Gig Economy Economy WTO WTO Public Stockholding MSP Economic Growth Masala Bond Environmental Performance Index Forecast of Economic Growth Functions of the Finance Commission

Budgeting has shown an ability to adjust to changing circumstances and necessities. Planning for economic development through employment, economic growth, and social investment has been a major aspect of public budgeting. The vision is provided by a development plan, and the operational framework is provided by a budget. The expenditure control machinery is used during the transition from a plan to a budget.

Budgeting and Planning have progressed through stages. First, it was to reduce the effects of the 1930s depression by creating fiscal deficits to encourage economic activity and then for the post-World War II reconstruction of war-ravaged economies. This required governments to actively organize both their own and the private sector's activities. The product's quality and its place in the overall strategy were more important than the price. The financial plan was seen as subordinate to the arrangement. Marshall Plan and public advancement plans were created to work with and oversee financial turn of events. The Indian government was one of the first to implement formal economic planning in the early 1950s; The Five-Year Plan established the framework for macroeconomic objectives as well as additional microeconomic facets.

The recognition that planning did not produce the anticipated benefits in the 1970s marked the beginning of its relative decline as an organized and formal process. Many projects were unsustainable financially and lacked the ability to generate funds, contributing to the extremely precarious state of public finances. Active economic planning was viewed as constraining market function and strengthening the state's role in Western industrialized nations.

1. In the context of globalization, planning must recognize the market and adapt to the operation of a dynamic market system.

2. The majority of nations have made planning a regular part of making their budgets. Plans and budgets are now part of a medium-term financial strategy, blurring the traditional distinction.

3. The focus has shifted from investment planning to macroeconomic stability planning. This necessitates prudent fiscal policies aimed at limiting expenditure growth. Governments' overall capacity for policymaking has been enhanced by analyzing the proposed projects' strengths and weaknesses.

4. In a number of nations, programs' contributions are periodically evaluated; for example Sweden.

5. While economic planning has taken precedence over macroeconomic considerations, the goal of economic stability has taken precedence over development, which is still a significant objective.

6. The recipient nations and donors participate in the overall decision-making process, and donors have made a significant contribution to the financing of development plans. Aid is typically contingent.

The focus of Budgeting has shifted away from inputs and toward outputs, as well as the assignment of expanded financial powers and programs to agency heads. There are sub-allocated resources for each program. The delivery of goods and services is the responsibility and accountability of an agency head. Policy implementation occurs at the agency level, while policy formulation occurs at the apex. A forward contingency plan, adequate internal controls within spending agencies, and an outputs framework of accountability in the context of decentralization are the main tenets of this new public management philosophy.

Contractual payments make up a significant portion of the public expenditures that are currently made to non-departmental organizations, autonomous organizations, and local governments. While others are actually providing services, governments are becoming funding agencies. Budgets need to be strengthened to keep up with globalization's developments. State-run administrations are putting more accentuation on improving efficiency in government associations. The continued separation of policymaking and financial management is a problem. Policy formulation and implementation must include financial management. Customary monetary arranging included supply-driven consumption. Deficits grew because the relationship between actual expenditures and resource situations became less clear. In the event that the deficit is greater than anticipated, trigger mechanisms have been implemented to reevaluate entitlement benefits. Policy revisions and a greater emphasis on resource conservation are required to limit expenditure growth rather than increase demand.

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