Practitioner Insights: lessons from a public expenditure review in India

How is a public expenditure review helpful?

Politicians and bureaucrats are routinely questioned on difficult targets to ensure universal primary education, eradicate malnutrition and stunting, and similar. Given that the achievement of these outcomes is a challenge for governments across the globe, it is worth understanding how public finances are allocated and spent to achieve the goals set in departmental vision documents.

We conducted a state-level public expenditure review (PER), looking at child-focused expenditure in the Department of Education (DoE) and the Department of Women and Child Development (DWCD) in an Indian state in 2017. A state-level PER is a first step towards understanding gaps in service delivery relating to resource allocation decisions and expenditure process-related bottlenecks.

[button-link text="Explore the rest of our Practitioner Insights series" link="https://www.opml.co.uk/search?campaign_tags%5B%5D=practitioner-insights&contenttypes%5B%5D=blog"]

Context analysis

Since a high proportion of the DoE and DWCD budgets is spent in the strategic areas of education and nutrition, this PER studied five child-focused schemes, rather than the entire functional area. For instance, allocation and spending on the DoE is the highest among the social sector departments in the state, accounting for 17.5% of total spending by the state in the 2015/16 financial year. Additionally, these schemes operate as instruments of service delivery within the departments. So, this PER, apart from conducting a department-level overview on allocation and expenditure, also looked at tracking changes in composition of a scheme’s allocation and expenditure, and understanding process related bottlenecks that affect service delivery.

Key insights

Though planning and budgeting guidelines remain rigid, the state can showcase best practices to provide direction to districts. The flagship DoE scheme Sarva Shiksha Abhiyan (SSA) aims to provide universal elementary education, while the Integrated Child Development Scheme (ICDS) focuses on nutrition, primary healthcare, and pre-school education to children under six. While both schemes focus on service delivery, there is little flexibility in planning and budgeting to address the evolving needs of their service delivery units (such as schools and creche centres). Hence bottom-up planning is relegated to dusty scheme documents, leaving districts with very limited space to innovate.

However, there is evidence of good and innovative practices being adopted by some districts circumnavigating the strict rules of line item planning and budgeting. Currently, relevant Commissionerates collect expenditure data from districts. One suggestion is that they also collect and publish non-financial data on good practice and progress made by districts for adoption by others.

The creation of a comprehensive guiding framework for expenditure can speed up execution at the district level. Districts are able to spend an average of over 85% of funds allocated for flagship education and nutrition schemes (SSA and ICDS). But this statistic does not capture the fact that execution is often delayed due to the late issue of guidelines on the onwards transfer of funds, the breakdown of allocation components for the scheme, and any changes in fund flow/implementation. Hence, there is clear value in replacing multiple government resolutions that are issued throughout the year with a broader guiding framework. This can both speed up fund execution and has the potential to reduce the current lack of clarity on implementation.

Fund release should not follow the maxim of better late than never. The timing of releases severely affects the usefulness of the grant, especially for service delivery schemes related to education. The study focused on fund transfer for SSA to two districts for the 2014/15 and 2015/16 financial years. In both districts, less than a quarter of funds were released and spent in the first quarter of the financial year. Efforts need to be made consistently to release school-specific grants-maintenance, teacher, uniform, and school grants for a scheme like SSA at the beginning of the school year. The finance department and Commissionerates release funds in installments based on rules of thumb in terms of financial prudence (and budget availability). While it is understandable that it is not possible to overhaul the system overnight, it is important that they consistently remain cognisant of time dependent releases in their planning.

If unit costs of material components increase, wage increase of service delivery providers should not be forgotten. Two schemes aimed at providing meals to primary and pre-school children employ cook-cum-helpers and a frontline worker called an angwanwadi sevika respectively. While unit costs of other components have increased (although not significantly) over the past four to five years, their wages have remained stagnant despite them taking on more responsibilities. Given that these schemes are heavily dependent on these service providers, it is critical for the government to take stock and re-prioritise budgets to pay workers adequately and in line with inflation and wage progression.

Key takeaways:

• There is room to innovate and showcase best practices even while the state is slow to change its rules and regulations.
• Streamlining and reducing official communication has the potential to positively manage hitherto delays in execution of funds and subsequent implementation.
• Timely actions on fund transfer and revision of plans and budget is not only good practice but also key to achieve target service delivery outcomes.

Aashna Jamal is an assistant consultant within OPM’s Public Sector Governance portfolio, based in the New Delhi office. At OPM, she has worked on projects relating to social protection, health and nutrition, education, child protection, and public finance.

[button-link text="Explore the rest of our Practitioner Insights series" link="https://www.opml.co.uk/search?campaign_tags%5B%5D=practitioner-insights&contenttypes%5B%5D=blog"]

Image source: Vitaly Khodyrev / Shutterstock.com