1. Tarlok Singh's Vision

Tarlok Singh was among the first of the bureaucrat-turned academicians, but with some major differences. He distinguished himself in his second vocation as remarkably as in his first, and the second, spanning almost four decades, was almost as long as the first. Most important, he turned towards research and the academics not to earn a living through establishing a NGO, consultancy group or taking up a professorial position (often without any qualification for a professorship) in an academic/research institution, but to provide voluntary services, without remuneration, personally driving around the city to motivate the research/academic community and to mobilize resources almost singlehandedly in the initial years. This was to ensure that the outcomes of Jawaharlal Nehru's new temples and the planning process to whose development he had substantially contributed, could reach out to the oftneglected segments of the social order.²

²Tarlok Singh was in the Planning Commission from 1950 to 1967, when he left as a Member. Among his earliest research study is one on Poverty, and Social Change, first published in 1945 and the second edition in 1969.

I remember during one of my earliest discussions with him in the later half of the 1970s, almost a decade after he left the Planning Commission, the seriousness of his concern on the failure of social scientists to address social dimensions of growth, evident failures to bring in equity in distribution of the newly emerging product mix from multi-faceted development programmes, reflected to an extent in the new temples of dams and large scale industrial undertakings in the public sector. While he recognized that Indian researchers had brought out volumes of theoretical and applied research studies and commendable lecture series, his regret was that the reflection of these scholarly works on planning and policy interventions was not so evident. He would then ask the question (I understand with many researchers with whom he would interact), why was this happening? During these discussions, Tarlok Singh came up with the idea of developing a network of social science researchers. His years of silent, almost single-handed perseverance resulted in the Indian Association of Social Sciences Institutions (IASSI).

2. Tarlok Singh, IASSI and Social Equity

The frustration with the relevance of social science research to bring about a change in the social order and the growth profile of the country, the prime objective of establishing IASSI was to provide a forum for social science researchers to interact among themselves and with others on a regular basis, challenge the conventional approach to research and espouse the cause of social science research in bringing about a change in the socio-economic conditions of the people. An equally important objective was to shift the focus of social science researchers from sector-specific research in critical social development sectors like demography, education, health, poverty alleviation, women and child development, inequity and welfare.³

³The 10th Plan Mid Term Appraisal had brought out the challenges that remain in these sectors for attaining outcomes of planned interventions. These issues may need special attention in the 11th Plan, if development benefits have to percolate to the people to reduce geographical, sector and other inequities in a highly polarizing democratic system.

Tarlok Singh recognized the need for a change in the approach to research for planning and action, as early as in the late sixties. In the second edition of his first research work on Poverty and Social Change (1945, second edition 1969), he lamented (p.231–232) “Economic growth and the process of development associated with it have enabled some groups and some areas to advance more rapidly and with greater assurance than others …. At the same time, political factors at this stage have greatly weakened the vision and the unity of effort needed for a society to face up to its main problems of social and structural change …. The gains have to be consolidated. Key tasks have to be identified afresh, the available social forces rearranged, the struggle for essential goals waged anew.”⁴ (emphasis added) The scenario had not changed in 2006 also.

⁴The 1945 Study was based on intensive field research, involving interactive sessions across villages in Hissar district during 1940. This provided a bench mark to Tarlok Singh. Having maintained these records/schedules, he went back in 1967 to the same villages and families to study the changes over the 27 years period in an area that had greatly benefited through economic planning in the post-world war II and independence period.

It is in this perspective, that the challenge researchers have to take up is changing the research methodology and framework, extending it to more of multi-dimensional and integrated research and to bring together the galaxy of knowledge across sectors and regions and provide a range of options for addressing development and equity-oriented challenges that 25 years of planning and five set of National and State plans (as in the late 1970s) had failed to resolve. At that time, the development agenda was limited to coverage of people to service provision and work inputs, whether in terms of housing, water, roads, electricity, credit, and employment. Issue of sustainability of the coverage was not a matter of concern. Performance was primarily measured by coverage records even 100 percent coverage of electricity was recorded when a lamp was installed, irrespective of its working condition, or water being provided through installation of a (non-operational) hand pump for a few thousand people, or provision of toilet unit per 100 odd households, without attached services of water.

A target-hunting process started and performance was measured only in terms of attaining a pre-determined quantum of attainment. Social science research documented these type of attainments —number of plots and houses for the people and the poor among them, kms road constructed, water pumps installed, number of schools started and school buildings constructed (even if no teachers appointed or black board installed), number/amount loans sanctioned and/or disbursed, units of employment created, et al.

It did not strike the researchers that impact of these outputs was possibly more important than the attainment of the deliverable outputs. Social scientists were, no doubt, concerned that even after poverty alleviation inputs had been provided and there was a momentary improvement in the status, the tendency to slide back to the original position was more often than not, also evident. Many researchers spent time and efforts to estimate the sliding down time span. The transfer of highly subsidized, and often free, plot or housing unit from the poor to the non-poor, the failure to draw subsidized food grains and kerosene, even though records of rising distribution were provided, growth rate of population not declining inspite of free distribution of condoms, female literacy rate not improving in many parts of the country even though special efforts were made and incentives provided, were issues taken up by researchers but few would examine the causative factors or come out with a strategic plan to shift attention from quantitative attainments to qualitative attainments.

Related to this was the use of outdated data and information to strengthen analysis of issues already covered extensively. The classic Indian example is of using Census data, often outdated by 4–5 years when published and being used for another 5–6 years after the next Census, or the NSSO data, based on limited coverage and weak sample selection methodology. Sometimes quick surveys supplemented this database.

The growth dynamics of Indian development and particularly urbanization, often reflected in a changing demographic profile, poverty mix, extending slum settlements, and the rural non-farm sector, tend to get overlooked. The prospective clientele of social science research, who decide planning and policy processes and contents, soon became aware of these limitations of social science research.

Along with these developments, the leadership of the national planning process shifted from professional economists to the political leadership, with the planning portfolio being taken up as a stopgap arrangement till appropriate ministerial positions were acquired. A similar pattern soon emerged at the next level and the planning system was flooded with stop-gap bureaucrat advisers rather than professional economists, statisticians, sociologists, technocrats and financial analysts. Bureaucratic file filling approaches of numerical target hunting, allocating and disbursing funds and measuring asset creation and population coverage was institutionalized

Tarlok Singh had sometimes expressed his sadness on these emerging trends in research and its management. Though outcomes of development were not in the development dictionary at that point of time, his vision perceived the final output of the planned development process to be the impact on the people. This outcome would justify the efforts devoted to planning and the half a century existence of the Planning Commission itself. Towards the end of the 20th century, he would sometimes lament over the sliding down of the relevance of the Planning Commission, designed as the national think tank of economists, statisticians and planners of proven attainments. He was sad of the take over of the organization by administrators and politicians waiting to find an attractive administrative/political opening (cooling period) in New Delhi and shifting the thrust from development strategies to administrative management of sector and plan allocations.

The challenge for social science researchers is to come out with analytical contents and planning and policy options to enable efficient transfer of research outputs into the planning and policy framework and bring back planning to the forefront of the development process.

In this Paper, I shall examine recent initiatives in governance reforms, which if well designed and properly implemented, have strong prospects for having the long desired outcomes of development planning and public expenditure programmes. The first two years of implementation, does not, however, provide evidence of developments taking place in the right direction. Research inputs are required to prepare the approach and a toolkit to enable planners and decision makers to restructure the approach to planning and budgetary reforms that will bring forth sustainable development outcomes. Developing an outcome budgetary system is a slow process and even the developed world has not had an easy development path.

3. Outcome-oriented Planning and Budgetary Systema. Need for Outcomes

As long back as in 1968, Tarlok Singh had lamented the failure of planning to make an impact on those segments of the population that needed to be lifted first. He was concerned that “Sections of the community which have in fact benefited from economic development seem eager to consolidate and add to their gains than to lift the levels of the community as a whole…. One witnesses a certain hardening of privilege and of vested interest.”⁵ He wanted the administrative and leadership to get re-oriented to the then new emerging circumstances and strongly advocated an outcome-oriented process of planning, though not using this term. To quote: “The tasks of management, organization and administration in the context of development have been under-estimated. Sufficient value has not been placed on performance, action and results.”⁶ He goes a step further to observe (p.540): “ The consequence is that failure in accomplishing tasks assigned to individuals and organizations, instead of being regarded as an offence against society, has been too often condoned.” He particularly stressed on developing “accepted standards of performance.”

⁵Tarlok Singh, 1969, Towards an Integrated Society: Reflections on Planning, Social Policy and Rural Institutions, Orient Longmans, p. 537.

⁶Tarlok Singh, 1969. Towards an Integrated Society: Reflections on Planning, Social Policy and Rural Institutions, Orient Longmans, p. 540.

Tarlok Singh must have been delighted towards the completion of his distinguished journey to find the present Prime Minister also concerned with the outcomes of the planning process. The Prime Minister had highlighted the problem with the appropriate term “Outcomes” and has often expressed the necessity of changing the output-driven planning and expenditure management system into an outcome-driven process to ensure that public expenditures make a definite impact that is sustainable over time.

b. Recent Indian Initiatives on Outcome Budgeting

The first major step towards an outcome budgetary process was the Fiscal Responsibility and Budget Management (FRBM) Act of Government of India in August 2003, to encourage Central ministries to streamline their expenditures. State governments followed through with State level legislations thereafter. A framework was provided to introduce budgetary reforms to reduce the fiscal deficits and improve effectiveness of public expenditure.

The need for a medium term expenditure framework was recognized and the foundation to undertake preparatory work for an outcome budget had been laid down.

The preparatory period for the Central budget of 2005–06 was the next important step towards an outcome budgetary era. The first outcome budget for the country, a 720 pages document presented to Parliament in August 2005 was, however, a quickly produced and largely irrelevant document in the context of an outcome budget.

One may overlook this failure, as there was a hope and commitment that over the next 12 months, the Finance Minister would be able to put his house in order and present a more respectable and professionally acceptable outcome budget 2006–07. The third major step, the 2006–07 Central Budget, presented in mid-March 2006, along with a set of outcome budgets for selected Flagship programmes of Government of India, does not show any noticeable improvement. After the first Outcome Budget fiasco, the responsibility for limited achievement in the second Outcome Budget had been shifted to Central ministries, who were entrusted the task of producing outcome budgets for a few flagship programmes.

The poor outcome of the outcome budgetary process is also evident at the State level. One of the forward looking States had prepared programme performance budgets for 7 departments, but many outcome indicators are the traditional output indicators. A specific department in another State has brought out some budgetary indicators, but few reflect outcomes. Some other States have been planning post-FRBM activity, but most states have not started the process.

c. Good Intentions, but No Strategic Planning

The good intention to introduce an era of outcome budgetary process in the country has not been followed up by proper strategic planning of the potentially powerful tool to usher in an era of accountable and transparent governance, critical components of the reforms in the system of governance. The first step was appropriate, the centre of outcomeoriented development process was to be the Planning Commission. There needs to be an integrated approach of planning of public expenditure programmes and outcome-oriented management of public expenditure programmes.⁷

⁷This has been the missing link in the performance budgeting experiences in other countries also, including those initiated by the IMF, the World Bank and other development partner institutions.

The appropriate decision to place the lead role for developing the outcome budgetary process in India in the Planning Commission seems to have been, however, made without fully examining the capacity of the Planning Commission to take up this task.⁸ The lack of expertise within the Planning Commission and inability of Central ministries to provide their inputs resulted in the 2005–06 outcome document that cannot be considered an outcome Budget. The Central ministries and departments of Government of India had been directed by the Central Ministry of Finance/Planning Commission to put in place their perceptions of outcomes of the expenditures of their major programmes and these were hurriedly put together. The Central ministries did not receive the required guidance and training from the Finance Ministry or the Planning Commission to change their output-oriented mindsets.

⁸Overlooking the existing in-house skills its Planning and Evaluation Organisation, an external expert was appointed who could not deliver. The first Outcome Budget 2005–06 may, at best, be taken as a serious expression of interest to produce outcome budgets over time. Global experiences on the slow process should not discourage going ahead, and the subsequent focus for the second outcome budget on selected flagships is a step in the right direction.

The Planning Commission's leading role did not last for long. The Finance Ministry took away the mantle of outcome budgeting within a year and subsequently abdicated their responsibility by shifting it directly to individual ministries, without arranging for capacity building inputs for the purpose. The state of knowledge and expertise is limited and is reflected in the second outcome budget. The Outcome Budget 2006–07 of Flagship Programmes presented by the Finance Minister in March 2006 and individual Outcome Budgets of some of the Central Ministries provide the evidence, with most of their outcome indicators failing to capture outcomes of their programmes.

At the level of State governments, the scenario has also not improved during the financial year 2005–06 and this is reflected in the State Finance Ministers’ Speeches and/or the State budgets for 2006–07. The Maharashtra Finance Minister, for example, had categorically promised to produce an outcome budget in his State Budget Speech for 2005–06, but failed to do so in the Budget for 2006–07. Some preparatory work had been initiated but not carried to its logical conclusion. He has now promised do so in the next budget for 2006–07. Karnataka has produced a set of outcome measures, but most of them are traditional output measures. Another State is using international technical inputs for strengthening fiscal management, but outcome budgeting is beyond its scope. State level preparatory work presents a good example of what should not be done to install an outcome-oriented budgetary process.

Researchers, think tanks and the media have also not contributed to the development process of an outcome budget. While the research groups have not undertaken exercises to address some of the unknown complexities of outcome budgets, the media has failed to recognize the significance of the new approach to planning and budgetary management. All these stakeholders in fiscal and governance reforms have a role to play.

4. Towards an Outcome Budgeta. An Approach

Two years of experience in preparation of an outcome budget in the country and 10–15 years in other countries bring out issues that require to be considered by the government at the Central and State levels, to have a realistic roadmap and a more relevant Outcome Budget for 2007–08 and the appropriate framework for the 11th Plan. Some of the conventional practices in budget preparation that go against the spirit of outcome budgeting are first examined, followed by clarifying basic concepts needed for an outcome budgetary framework, fixing responsibilities among partners within the government and integrating activities of planning and financing to attain outcomes, and capacity building of technical personnel to prepare outcome budgets.

b. <italic>Outcome</italic> Budget, not based on Outcomes

The Outcome Budget 2006–07 brought out evidence that goes against the basic spirit and principles of outcome budgeting. An important principle is to reward good performance (in terms of using public funds) and stringent action taken when public funds are left unutilized and/or inefficiently managed. Some Central ministries have been provided additional outlays for 2006–07, even when they were not able to completely spend the 2005–06 budgetary provisions. A matter of more serious concern is the rationalization of the Finance Minister for the sharp increase in outlays of some flagship programmes -output-driven plan to increase numerical coverage. There is no mention of outcomes planned to be attained through the increased coverage, or any information provided on expected outcomes through funds during past few years and expected outcomes from the enhanced outlays this year. This is in sharp contrast to the hope raised in the Budget 2005–06 that budgetary outlays for 2006–07 will take into account outcomes of well identified flagship projects.

A few illustrative examples from the Budget Speech bring out this glaring contrast between the commitment in the Budget 2005–06 and actions taken through the Budget 2006–07. The increased outlays for a flagship programme like the Sarva Siksha Abhiyan (SSA), a major UPA initiative, for example, is for outputs of new schools to be established, additional class room to be constructed and additional teachers to be appointed. The budget and the budget speech is silent on critical issues like utilization of the new facilities and their impact on student performance.

The Finance Minister feels satisfied that “93% of the children in the age group 6–14 years are in school” and he states further that “the number of children not in school has come down to about one crore.” Considering these statistics to be indicators of good performance, the Finance Minister has announced: “Recognising good performance, I propose to increase the outlay for SSA from Rs.7,156 crore to Rs. 10,041 crore in 2006–07.” He further justified this 40 percent additional outlay in terms of the traditional outputs to be attained. To quote: “500,000 additional class rooms will be constructed and 150,000 more teachers will be appointed.” It is assumed that everything in a school will become operational immediately and without building up other infrastructure and services. The opportunity to design an integrated education programme so that outcomes emerge over time, has been lost. No consideration has been given to well known roadblocks encountered in translating the school infrastructure (buildings), resources (teachers) and clientele (children) into outcomes.

c. The Outcome Concept

The concept of an outcome is not clear. The justification of additional budgetary outlays for the SSA as well as other flagship programmes brings out lack of clarity on the concepts. Across the budget document, increasing coverage of population is the basic rationale for higher budgetary provisions for drinking water, sanitation, health services, child nutrition, gender equity, employment, road connectivity, among others. One does not find any reference to outcomes of past expenditures in these programmes or type of outcome expectations over time from the enhanced outlays.

The 2006–07 Outcome Budget of the Central Finance Ministry for select flagship programmes and of some other Central ministries for their own flagship programmes have provided some information on the budgetary provision, outputs and outcomes. The outputs and outcomes have been properly defined for some activities and programmes. However, in the majority of cases, the lack of clarity of the concepts remain. Table 1 presents a few illustrative perceptions on outputs and outcomes for flagship programmes. Table 1

Outputs and Outcomes in Practice in Central Ministries

	Programme	Output	Outcome

1.	Sampoorna Gramin Razgar Yojana (SGRY) & National Rural Employment Guarantee Act (NREGA)	Wage employment	Durable asset creation to strengthen livelihood resource base
2.	Swarnjayanti Gram Swarozgar Yojana (SGSY)	SHG formation & assistance	30–40% to cross poverty line in 3–4 years*
4.	Rural Housing (Indira Awaas Yojana)	House provision	Population coverage
5.	Pradhan Mantri Gram Sadak Yojana (PMGSY)	Road connectivity to specified habitations	Improved market outlets for rural products, access to health care & education facilities & travel time reduction*
6.	Training Grants to National Institute of Rural Development NIRD, SIRD ETC, OTC	Training	Improved knowledge & skills*
7.	CAPART	Project support	Coverage
8.	Provision of Urban Amenities in Rural Areas (PURA)	Road connectivity, employment activities	Achieve balanced socio-economic development*
9.	Integrated Wastelands Development Programme (IWDP), Drought Prone Areas Programme (DPAP), Desert Development Programme (DDP)	Water shed projects coverage, wage employment, user group formation, training	Area Coverage
10.	DFID assisted Rural Livelihood Project	Water shed projects	Area coverage
11.	Accelerated Rural Water Supply Programme (ARWSP)	Habitat coverage	Safe water drinking to all habitations by 2009*
12.	Total Sanitation Campaign	Household and school toilets	Elimination of open defecation, leading to better & healthy quality of life*
13.	Rural Telephony	Coverage of telecom and mobile	Physical assets
14.	Rural Electrification	Capital subsidy and finance	Coverage of rural households, including BPL families
15.	Jawaharlal Nehru National Urban Renewal Mission	Urban Infrastructure Services	Not indicated
16.	National Rural Health Mission	Coverage ASHA, pulse polio immunisation, family planning welfare measures, RCH	Reduced IMR & MMR, improved coverage of public health services*
17.	Sarva Shikslia Abhiyan	Coverage of children, asset creation and teacher employment	Reduction in out-of-school children, drop out rate, & gender gap in gross enrolment ratio*
18.	Mid-day Meal Scheme	Coverage of children	Not available
19.	Integrated Child Development Services	Asset creation (Projects, Anganwadis)	Not available

Source: Government of India. Ministry of Finance, Outcome Budgets 2006–2007 of the Flagship Programmes Government of India. Ministry of Rural Development, Outcome Budget 2006-7
Note: *More relevant p6rccption of outcomes

The Deputy Chairman Planning Commission has presented a more realistic perception of outcomes of education programmes during an Inaugural Address to the first National Consultation on the 11th Five Year Plan (Women and Child Development department). His perception of the outcome of the education programmes is not in terms of measurement of coverage of school age children, construction of additional classrooms or appointment of new teachers, or even the pass out and drop out rates, but rather in terms of assessing the proportion of children who could not just read or write but understand what S/he would read in one or two paragraphs of a school book.

d. Fixing Responsibilities <italic>— Outcomes, not Our Responsibility Syndrome</italic>

During consultations with some Central flagship programme ministries during November-December, 2005, two typical responses were provided by their senior decision makers to rationalize the incapability of Central ministries to have outcomes from their expenditures. The most common reason is that responsibility of a Central ministry is to provide the resources and possibly policy guidelines/schemes, but the implementation, operations and management are responsibilities at the State level, and often the subject also falls in the State list.

Another reason, less often provided, is that for 4–5 months in a year, a Central ministry is tied down with the responsibility of responding to parliamentary questions and interventions! The State governments similarly pass on the buck to the local governments, both urban local bodies and panchayati raj institutions, for their failure to think in terms of attaining outcomes.

e. Outcome Budgeting or Outcome Planning First?

It was expected that the annual plan discussions during towards the end of 2005 and early part of 2006 would have provided an opportunity to thrash out some of the outcome related issues concerning both plan and budgetary outlays. To, install an effective system of outcome budgetary process, the wide range of activities that can result in outcomes, require proper planning, especially when outcomes are dependent upon utilization of budgetary provisions from other ministries and more importantly, other tiers of the system of governance, the State and Local governments.

Building a good system of coordination and convergence among the partner ministries/departments may require additional budgetary provisions at some levels or for some activities. The operational framework to build partnerships has to be first planned and then budgeted. It was expected that some developments may have taken place after the Outcome Budget 2005–06, as the work plan envisaged outcome budgets for a few flagship programmes. Some indication of having initiated this process should have been provided in the Budget speech or the Outcome budget 2006–07, but the expectations have failed to materialize.

Discussions with some Central ministries and State finance departments do not provide sufficient confidence.⁹ At the State level, there is little evidence of consultations between the Planning Department and the Finance Department on issues relating to outcome budgeting, the latter assuming that it is their sole prerogative.¹⁰ In one of the forward looking States, where I had discussions during November 2005 to February 2006, the Planning Department was not specifically involved in the stage of conceptualizing the approach or the components of an outcome budget. The critical Planning department was given the same role as all the other departments in the State government during the consultations and orientation presentations on the outcome budgetary process. This was despite the fact that the State Finance Minister was also the State Planning Minister.

⁹Some of these issues came up during a Consultation organized by SDS in December 2005, in which some Central Ministries and State Finance departments, researchers and academicians had interacted.

¹⁰I have seen in a State Finance Department, planning to prepare an outcome budget, and having multiple Finance secretaries each looking after specific portfolios, that interactions on outcome budgetary process was missing even among them. The specific official considered the total process to be an exclusive prerogative and the outcome was a failure to bring out an outcome budget.

An international agency is providing technical assistance to three Indian States under a fiscal reform initiative. The thrust in the performance budgets remains to be on outputs, which often is also shown as outcomes. This is a disturbing development in the context of designing the roadmap towards a full fledged outcome budgetary process.

f. Planning Commission or Expenditure Department

The role of the Planning Commission appears to have been taken over by the Ministry of Finance, and within the Finance Ministry, the control appears to be exclusively with the Department of Expenditure. The Department of Economic Affairs does not appear to have any role. Is this a good development? Several operational and policy issues arise, such as:

Is an Outcome Budget only an accounting process, the restructuring of accounting classifications, or a financial management process, or an administrative process, or something more?

Can an outcome budget be effective if it is not integrated with the planning process?

What may be the role of economic planning in identifying and building forward and backward linkages across ministries and sectors?

What has to come first - the development plan or the budget, the traditional chicken and egg issue?

If the budget is to be the lead player, would it not result in continuation of a supply-driven planning process, where people's requirements and participatory processes under the decentralized system of governance (73rd and 70 Amendments of the Constitution) take the back seat.

If the objective of the Prime Minister is to rationalize the system of planning and governance to produce outcomes and not just outputs, would it be a more realistic strategy to first have a full plan, then work out the resource availability position, followed by the annual budgets to incorporate the priority outcomes to be attained, and finally, development of specific outcome indicators to measure progress and evaluate the attainment of the outcomes through the expenditure management system?

Social science researchers have a critical role to play in contributing to the development of a full-fledged outcome-oriented planning, budgetary and programme management system. A good outcome-oriented process cannot be developed only through administrative and accounting expertise, though these are also required in the multi-disciplinary process essential for a good outcome-oriented system.¹¹

¹¹A Working Group of Financial Advisers (WGOFA) of selected Central Ministries was constituted by the Ministry of Finance on May 6, 2005 and it submitted its report in September 2005. The five member team had majority of members of the administrative services, one from the audit services and none from the economics services.

It is in this perspective that some conceptual and operational issues are examined that social science researchers may like to consider to enable the government to put in place a proper system of outcomeoriented planning and budgeting over the next 3–4 years. The Planning

Commission, hopefully, will take seriously its own commitment to outcomes of planned development, by working out the 11^th Plan sector allocations on basis of outcomes of the 10^th Plan allocations. In the initial period, Planning Commission may keep its focus on a few flagship programmes that Central and State Ministries may identify.

4. Conceptual Issues<sup><xref ref-type="fn" rid="fn012">12</xref></sup>

The 11th Finance Commission had recommended the need for a performance-oriented budgetary system, an approach that is being advocated by global partners, in particular, the IMF and the World Bank. Several countries in the developed world (USA, UK, Australia, New Zealand) and some in the developing world, especially in Africa, have initiated the process over the last 10–15 years. Performance budgeting, to quote the WGOFA Report (p.) “is a highly complex and administratively demanding exercise, and is still in various stages of evolution the world over.” In India, the August 2005 initiative was the first step to go beyond measurement of performance in terms of physical targets and quantitative deliverables to outcomes and impact of the use of the outputs.

¹²Much of Sections 4–8 are abstracted from my recent theme Paper, “Towards an Outcome Budgeting System: Concepts and Approach “presented at an Outcome Budgeting consultation organised by SDS for senior policy makers and researchers on December 23, 2005.

A review of the Central Outcome Budgets of 2005–06 and 2006–07 and a summary presented in Table 1 have brought out the lack of clarity in the concepts of outputs and outcomes. In many cases, the outputs are shown as outcomes and in several others, there are no indication of outcomes. Some key concepts in the context of preparing an outcomeoriented plan, budget and expenditure monitoring system are presented in Table 2. Some of the concepts are generic components of this system, but specificities of individual ministry/department have to be taken into account in designing the ministry/department-specific system. A set of indicators and indicator products have to be developed, along with the specific data base, and analytical skills to use the indicator and indicator products for measuring the progress through the monitoring exercises. Data on the costing of key expenditure heads is an important requirement. Technical skills to develop and use the monitoring outputs is also essential and this has to be at two levels, first for the technical personnel who will generate the data and develop the indicators and indicator products, and second, at the analytical and application level of senior decision makers, both the administrative and political leadership. Table 2

Key Concepts for Outcome-oriented Budgeting and Expenditure Management

	Concept	Stage	Purpose

1.	Process Monitoring	Implementation	Assess/track progress, identify actual/prospective roadblocks, provide inputs for modifications to components. delivery system, human resources, and then again track their progress
2.	Output Monitoring	Operational	Track targets, measure coverage, assess cost and time overruns
3.	Outcome Monitoring	Completion & thereafter	Assess impact of the out reach of the Outputs within the short and long term (sustainability) context
4.	Performance or Result Budgeting (PBB)	Planning	Provision to be related to outcomes and not outputs or linear based progression basis
5.	Impact Monitoring	Post-project stage, after a time lag	Assess, largely through qualitative indicators, change in the area, environment quality of life, where the effective absorption of the outcomes is expected to bring about a change
6.	Performance Auditing	Post-project	Assess performance of Core Team
7.	Roadblock Assessment	All Stages	To enable causative factors analysis of attainments and non-attainments and facilitate inter ventions to address roadblocks
8.	Coordination, Convergence Leveraging	All Stages	To ensure effective implementation and impact
9.	Building Effective Stakeholder Partnerships	All Stages	To facilitate planning, operations & management to produce Programme Outcomes

Source: SDS

A critical issue is measurement, which has to be a criterion or value used to determine the magnitude or degree of something, a tool to determine the effect of the initiatives or activities on attainment of objectives and goals. Often, the measure assigned to an objective may have one or multiple measurable components and can be measured by different ways to ensure the desired results are being attained. Furthermore, the measure has to be with respect to a pre-determined baseline, which is a measure of the current state, the starting point from which the process of attainment has to begin. Hence, each measure has to have its baseline.

The feedback from monitoring of operations at the various stages of planning, implementation and management of programmes has to be used not just for comparative analysis, as is usually done, but also for analytical purpose, to identify operational problems likely to affect attainment of the outputs and outcomes, and more importantly, facilitate the programme management team and the policy and decision makers to make appropriate interventions. In this context, the indicators and indicator products become important components of the outcome planning, budgeting and management toolkit. The main objective of an indicator is not just to provide information for comparative evaluation and understanding the status, as often assumed by researchers, but to, more importantly, also provoke, stimulate and sustain the thinking process and facilitate emergence of realistic demand-driven planning, policy and decision making options. In effect, contribute to efficient project and budgetary management, particularly important for an outcome-oriented system.

The role of indicator products is often overlooked. Indicator products are powerful tools to facilitate analysis for effective implementation and producing the outcomes by promoting forward-backward linkages, identifying key stakeholders, strengthening local partnerships, building up efficient coordination and convergence of input flows and leveraging local inputs and ownership.

5. Measuring Outputs and Outcomes

The Performance-based (PBB) (or results-based) and Performance-oriented (POB) (or results-oriented) budgeting is a budgetary process that seeks to attain outcomes and not just outputs.¹³ Both the PBB and the POB are based on an activity-based budgetary process, that links up budgetary provisions to the outputs and outcomes of the activities to be undertaken with the budgetary provisions. The PBB process requires that the budgetary allocations in Year 2 are based on attainments of outcomes of activities in year 1, whereas the POB process provides for some flexibility, and enables budgetary provisions to be made even if the totality of outcomes of the activities may not be evident, but the process to attain them has been introduced. The thrust of monitoring will be not on definite outcomes, but on progress on the road map to attain outcomes. As such, the annual time line budgeting has to be replaced by a extended budgetary process (3–5 years rolling-type), and over the period the outputs attainment process is replaced by the attainment of the outcomes. The outcomes are the policy objectives that are to be attained, whereas the outputs are the products that contribute to the attainment of the outcomes.

¹³International agencies often seek to promote a Result-based or Performance-based budgetary process, even before any preparatory work has been initiated. My interaction with the World Bank during a World Bank supported fiscal reform programme in Africa and the national government which had agreed to undertake the performance-based budgeting, resulted in a shift to performance-oriented budgeting in the first instance. As such, the process towards attaining outcomes should be first clearly established, before the budgetary provisions can be related to outcomes.

Under a system of performance-oriented budgeting, the focus has been traditionally on attainment of outputs. Thus, for example, km road constructed under the Prime Minister's Rural Road Development Programme is an output of the concerned ministry/department that implements the major rural road programme and under the outputs or deliverables approach, the completion of the construction of the planned road infrastructure is indicative of the desired level of performance being attained. The outcome-oriented evaluation will cover the improved effective connectivity to the rural poor to access urban-sourced facilities and inputs and reach out their products to higher value markets. The immediate outcome indicators for access to inputs will, thus, be related to improved access of urban-sourced facilities and inputs and the final outcome will be the impact of use of the new inputs, in improved heath conditions, education, productivity, incomes, and quality of life, among others. In terms of access to higher value markets for the rural products, the immediate outcome will be improved incomes and the final outcome may be related to quality of life.

In terms of an outcome-based performance evaluation, the criterion of evaluation will thus be the utilization of the outputs to produce another output, the impact on the user of the earlier stage output. To make the road usable and create an impact, some illustrative external sector components are provision of transport modes, easy access to requisite infrastructure, inputs like diesel/petrol, repair shops and trained manpower to utilize the road infrastructure. In a performance-oriented budgetary system, we may consider the road infrastructure as also an intermediate outcome and take it to represent a major stepping stone in service delivery towards the attainment of the final outcomes. To build linkages with several sectors, planning becomes a critical component of the public expenditure management system. Output and outcome tracking and measurement indicators have to be specifically developed for the set of activities in the location.

Some interesting examples of good performance of use of budgetary resources in terms of products/services/outputs but not indicative of the outcomes are:

Dam created without water

Road constructed without users or increase in users, volume of trade, traffic

School buildings erected without classes being taken

Teachers appointed but absenting

Children attending school but not able to read and write (or understand)

Computers installed in school but no training because of lack of teachers

The challenge is to convert the outputs into outcomes and the research community has to examine the conversion processes. Performance budgeting, thus, allocates budget resources to spending ministries and agencies on the basis of reviews of past performance with reference to attainment of specified outcomes and the statements and commitments on future strategies that will yield the final outcomes of the sector policies, while also contributing to the attainment of the outcomes of the national development agenda. The basic objective of this process is to improve the efficiency and effectiveness of planned expenditure programmes. It works best when programme managers have been devolved operational and decision making powers and there is some flexibility in resource allocation and management for enabling taking early advantage of opportunities to reduce costs and increase impact. At the same time, they are made accountable for the non-attainment of the outcomes.

Traditional rules-based financial management system in the civil service inhibits the devolution of management powers to lower levels. Devolved management requires probity and commitment, and ex post verification through recording, reporting and audit. This brings out the need for a strong link between agency activities and actual outcomes. The Ministry has to provide additional directions on how outcome and output indicators should be defined to ensure the type of tracking of the progress in the implementation of the activities for attaining the programme and policy objectives.

6. An Operational Modela. The Operational Mechanics

Figure 1 presents a schematic framework of the linear process and tasks to be undertaken to convert the budgetary outlays into outputs and then outputs into outcomes. The relationship is within an institutional framework of sector and national policies/strategies, supported by a strong Monitoring and Evaluation (M&E) system. The framework is illustrated with a major national flagship programme in Figure 2. Figure 1Outcome-oriented Planning, Budgeting and Programme Management System

Figure 2Outcome Budgeting System - Operational Mechanics

b. Activity-driven Programmes

The outcome-oriented operational system is designed with activities at four levels. There is a top-down approach in distribution of the activities at several levels to attain the national goals of outputs and outcomes. The Policy framework and instruments from the highest level (say, the Prime Ministers Office/Planning Commission) of the four-tier system determines budgetary allocations at the level of a Ministry, with respect to tasks to be undertaken and outputs and outcomes to be attained within the context of national/local development agenda. The tasks may be further divided among programmes, which constitute the second tier, and then further among the sub-programmes (third tier) and specific activities (fourth tier). Provision is made through the framework for both horizontal and vertical linkages among ministries/departments of the government and the three tier system of governance in India The activities may be across multiple sectors and partners, both within and outside the government operational system.

The four levels of operations are brought together through strategies, which indicate how the activities at the agency level contribute to achievement of objectives at the programme level and how the attainment of objectives at programme level may contribute to achievement of objectives at the policy area level of the ministry and the goals enshrined in the development vision of the country. A strong monitoring and evaluation (M&E) system provides continuous feedback at each stage of the operations to track and measure progress, identify the roadblocks and assess their impact on the implementation of the activities to produce the outputs and outcomes. Additional interventions or modifications in existing strategies may be decided on the basis of these M&E feedbacks. Building partnerships among partners and stakeholders and strengthening coordination and convergence of flow of inputs would contribute to the attainment of the outcomes and this has to be continuously undertaken at all the tiers within the purview of the ministry and only the final outcomes have to be communicated to the first tier.

c. Operational Constraints

Some major operational constraints likely to be encountered during the initial period of introducing outcome-oriented planning and budgetary process are:

Weak/non-existing data base on critical parameters

Weaknesses in institutional settings, administration, budget management and governance

Scope for unnecessary bureaucratic interferences and this may affect policy implementation

Weak/inadequate professional capacity to introduce the new approach

A review of performance budgeting in some of the developing countries in Africa have brought out operational constraints that are relevant in the Indian context also.¹⁴ The performance budgeting system is operational in the OECD countries as well as in the USA and Australia but the development process was spread over a considerable period.

¹⁴The countries include for example, Ghana, Tanzania, Uganda, Mauritius and South Africa.

Often performance information, if available, is not validated but more often, the information on actual programme expenditures is lacking or is extremely weak. The weakest link in the performance management chain lies in the comparative evaluation of the information produced and its analysis for decision making. Invariably the performance measurement process is operational without a management follow-up. The underdeveloped system of accountability and trained personnel is another major bottleneck.

7. POB Preparatory Process<sup><xref ref-type="fn" rid="fn015">15</xref></sup>

Strategic planning of sector operations is critical to install an outcome budgeting system. A two-stage programme is recommended, with substages within each of them. The two stages include preparatory activities and operational activities.

¹⁵This is largely based on an outcome budgetary model that I had developed for one of the countries in Africa in 2003–2004.

a. Stage 1: Preparatory ActivitiesStep 1: Determining Sector/Activities Key Parameters for Budgetary Provisions

Situational Analysis of Sector policies, visions, goals andactivities. This will also identify and assess the performance causative factors. If performance is deemed to be good or satisfactory, the causative factors (the activities) may be given a higher weight in budgetary provisions. Inadequate performance would require the sector specialist to consider strategies to dilute impact of negative causative factors and induct performance-enhancing strategies. The modifications may also include provisions for incorporation of new activities.

The planning and policy analyst should not only be able to assess the progress and impact, but also provide inputs to enable planners and policy makers to bring about policy shifts, as may be required to attain the national/local goals. An important requirement is identification of causative factors of success and failures and build intra-sector and intersector partnerships to improve coordination and convergence of sector activities with those of interdependent sectors. This is the crux of successful strategic planning, efficient budgetary allocations and programme management. Determining budgetary allocation cannot, thus, be the sole prerogative of the accounting and/or administrative personnel in the finance ministry.

Costing of Key Activities and Outputs under a changing policyscenario. The analytical outputs of the situational analysis should be supported by appropriate cost data on activities, both before and after the policy reforms for attaining outcomes. Examination of sector-wise cost implications of policy shifts has to be examined and provisions made for provision of additional funds, from both budgetary and non-budgetary avenues. The expenditure allocating agency invariably overlooks this aspect, but from the context of the operational ministry, it is an essential step to take the POB process further, while keeping it within the macro-economic and fiscal framework.

The sector ministry has to plan recurrent and capital budget provisions in an integrated manner, thereby ensuring that recurrent costs are provided not only for existing activities but also for new activities arising out of new capital expenditures. This will provide an opportunity to also reduce/eliminate certain recurrent cost items under the changed policy context.

Step 2: Linking Situation Analysis Outputs into Strategic Plan for Performance-enhancing Activities

Transferring Situational Analysis Outputs into Strategic Plan. In particular, the assessed performance causative factors, along with healthy norms (to be firmed up by the concerned Ministry, in consultation with sector experts) are to be used to decide budgetary provisions for performance enhancing activities.

Identifying performance enhancing activities to be included in the Sector strategic plan, such as, improvement in quality of operations, inclusion of new areas, training and access to new technology. A Handbook has to be developed that shows how these types of activities may be promoted and included in the budget.

Determining the methodology for introducing performanceenhancing activities to improve the quality of the outputs and outcomes, including through self-financing from within existing budgetary provisions. The Handbook would also develop the operational framework, a step-by-step process of inducting the performance enhancing activities and tracking its impact on performance. The totality of the activities would contribute to the national efforts towards reducing the budgetary deficit.

The preparatory activities under steps 1 and 2 requires a strong operational partnership among the sector ministry, inter-related ministries, finance ministry, and the planning commission.

b. Stage 2: Operational ActivitiesStep 3: The POB Methodology

The methodology has to be designed for introducing efficiency, productivity and quality enhancing components for improving performance. The methodology should bring out the approach, the activities and type of modification in budgetary provisions. Four specific interventions may be considered:

Efficiency in use of budgetary provisions. Efficiency may be enhanced through modification in the quantity and quality of inputs for obtaining the outcomes. In the education sector, for example, school infrastructure may be designed to reduce the staff component, and related cost components, and in the health sector, better utilization of staff will improve productivity of the personnel. The premise is that in the services sector, there is a tendency of under-utilisation of personnel.

Quality enhancing component to be introduced by a selffinancing process - using a proportion of the savings from the efficiency component in the education sector, these may include teacher's training, specialized contractual teachers, curriculum revision and teaching aids. In the health sector, quality enhancement may be inducted also through training inputs and provision of specialist equipment.

Stimulating competitive element among the most important resource, the human resources. Situational analysis will bring out causative factors of low manpower performance, which have to be addressed.

Raising Productivity through a range of work environment and incentive initiatives.

Each of the four components have to be determined on basis of objectives, outputs and outcomes to be produced. Specifically,

The objective-output-outcome links to be attained over a specified time period. All activities to be based on credible updated data, including on costing of activities, and addressing possible roadblocks.

Sector ministry prioritization of activities to fit within cost ceiling to be provided by the Ministry of Finance. If total cost of all essential activities, as assessed by sector ministry and considered critical to maintain operational efficiency is higher than the ceilings, the sector ministry will have the option to convince Ministry of Finance of the correctness of its estimates.

c. Stage 3: Conversion Process of Inputs into Outputs and Outputs into OutcomesStep 4: Organizational System

This is the critical task. The organizational system has to address basic issues like:

Quality of Delivery System.

Quality of Human Resources.

Type of Operational Processes to produce results.

Specialised type of Monitoring and Evaluation system to provide high quality tracking feedback in shortest time and enough to consider appropriate interventions, if required. To develop participation of local groups and communities to promote local ownership and management in due course and ensure sustainability of the operations on terminal of the programme operations. Hence a strong on-going and terminal evaluation process,

Package of sector/activity-specific Corrective Instruments and System to intervene in shortest possible time on identification of any major roadblocks that are likely to affect attainment of outputs and outcomes.

8. Outcome-oriented Planning and Budgetary Process: A FlagshipProgramme

The four level operational system of policy, programmes, subprogrammes and activities, along with identification of roadblocks at each level and outcome-enhancing activities is presented in Figure 2. The pattern is based on a full-fledged performance-oriented budgeting model, along with its monitoring and evaluating indicators that SDS had developed in 2003–04 for a major national level ministry in a developing country in Africa. The object, among others, was to reduce the budgetary deficit, as suggested by the IMF and the World Bank, and enable the government to direct operations to attain their national vision and specific development goals. Providing for activities to enhance productivity and efficiency in use of public resources was an integral component of the outcome-oriented budgetary model.

A global goal, which countries have committed themselves to attain, is taken as the starting point and the national goal is linked to this commitment. As in a federal country like India, the national outcomes depend upon outcomes of other tiers in the system of governance, especially from the sustainable aspect, the planned activities cut across the States and operational sectors and the totality of stakeholder groups in the country.

The national agenda is unbundled into manageable programmes through a well designed strategic framework. This facilitates assessment of development requirements and inputs, related to assessed absorbing capacity of the people to whom they have to be delivered. Simultaneously, local level activities get strengthened, enabling identification of roadblocks and addressing them through partnerships across stakeholder groups at the local level. Gradually ownership of the programmes get installed for ensuring the transformation of the outputs into sustainable outcomes.

As Figure 2 brings out, a strong monitoring and evaluation system has to be made functional from the start. Benchmark data base provides the platform to measure progress and set timelines outputs and outcomes, keeping in perspective the expected roadblocks. Through the whole process, special attention has to be given to efficiency enhancing activities, in particular, relating to productivity, quality, self-financing and local ownership. Critical problem of time and cost overruns have to be contained and social audit would induct the principles of accountability and transparency, the basic principles for good governance.

9. Some Misconceptionsa. Performance Budget is not Outcome Budget

The thrust has been on performance budgets, which has a limited coverage and tends to develop into an outlay-output relationship. Even these exercises do not go into critical policy and budgetary reform issues of why the planned outlay-output relationships are not attained and then addressing, though the budgetary and planning processes, the causative factors or roadblocks for non-attainment of the outputs. The idea of a performance budget, as I would see, is to facilitate the budget team in the finance ministry (or finance department in the State government) to also address identified roadblocks encountered in converting outlays into outputs and seeking to attain them in the year being budgeted.

The purpose of a performance budget is not just to present the coverage of the targeted outputs, as is often seen in the Performance Budgets of several Central ministries. The possibility of inducting an additional budget line for addressing roadblocks is an issue that requires to be considered to make the performance budget an effective budgetary reform instrument.

b. Performance Budgeting is not Restructured Accounting Classification and Rationalized Procedures

Restructuring of heads of accounts to facilitate the accounting process through a Chart of Accounts (COA) format is not adequate to install a performance budgeting system. The COA simplifies the maintenance of the accounts but does not enable the induction of efficiency enhancing factors.¹⁶ Similarly, focusing only on rationalizing procedures and computerization of accents will not bring out outcomes from public expenditure.

¹⁶In the developing country where I had developed a POB model, the focus was on the accounting processes. COAs, mainly because the core team was cost accountantsdriven.

Outcome based performance depends considerably on modifications in the operations and not just the modifications and simplification in the presentation of the accounts. The think tank to develop outcome processes has to have a wider spectrum of expertise.

c. Performance Budgeting cannot be Ministry/Department-specific

The preparation of a ministerial/department budget is largely within the context of the ministry/department, without giving consideration to the fact that the effectiveness of a ministerial/department spending is dependent also on operations outside the ministry/department to attain both the outputs and the outcomes. There is need to consider budgetary provision to facilitate building linkages with external partners within the government.

d. Finance Ministry makes the Final Decision

The logic of the Finance Ministry making the final decision on ministry/department budgetary allocations assumes that the ministry has the right set of data for the critical decision making process with respect to placing on ceilings on different programmes and activities. Cost data for assessing outcome-oriented budgetary allocations are, however, not adequately developed. Furthermore, building inter-linkages among activities across ministries and departments is a highly specialized activity, requiring wide ranging knowledge and technical expertise that may not be necessarily available with professional accountants, financial analysts and administrators within the confines of a single ministry/department. The Planning department/board at the State and more so the Planning Commission at the Centre, is expected to have the required mix of multidisciplinary expertise and a higher level of objectivity in resource allocation and strengthening inter-sector linkages.

10. Role for Social Science Researchers

The role for social science researchers arises in the context of the weak data base and objectively developed analytical outputs on intersector coordination and convergence, as well as the inadequacy of existing toolkits and experiences in converting outlays into outputs and outputs into outcomes. Equally critical is improving the understanding on roadblocks at different stages of the conversion process and methods to estimate the time and cost consequences of the roadblocks. A good assessment is needed of past performance at a fairly micro level to track causative factors of non-attainments and their costs to the ministry and the economy. Research outputs on these issues will strengthen preparation of outcome-oriented planning and budgetary processes.

During consultations with key decision makers at the Central and State levels,¹⁷ it emerged that while roadblocks have been identified during implementation of important flagship programmes in the government, through regular monitoring and evaluation undertaken within the ministry, by the PEO, and independent evaluators, no records of these roadblocks are normally maintained, even though some of them may have been effectively addressed. Researchers can contribute towards building up this inventory.

¹⁷These included in particular, the Planning Commission, Union Ministries of Finance, Agriculture, Rural Development Human Resource Development, Water Resources, and State Governments of Maharashtra and Karnataka.

Cost data of interventions made to address the roadblocks are also not maintained, possibly not even considered important, as human input cost of existing resources is generally not taken into account in the system of government accounting. It is critical that while developing unit cost estimates for preparing an outcome budget, the unit cost of identifying and addressing roadblocks is also considered.¹⁸ This is essential to develop and institutionalize the outcome budgetary process. Initially, this may be restricted to flagship programmes, and a sub-budget line may be incorporated in an outcome-oriented budgetary process.

¹⁸There seems to be very little documentation on roadblocks encountered in implementing programmes, even in the context of attaining outputs in particular, documentation on additional costs incurred to remove them and budget heads from where funds were transferred for this purpose is almost non-existent. Data base on fiscal outlay utilization requires considerable research.

Another critical challenge is to strengthen the inter-sector/ministerial partnerships as most development programmes have multi-sector ramifications. While the details are considered during the planning process and also indicated in the strategic plans, the operational linkages, both forward and backward, require to be more strongly inducted in the strategic implementation action plan. Social science researchers can provide definite inputs at this level of the development process.

As the purpose of the outcome budgetary exercise is not to be restricted to strengthening the monitoring of the utilization of the budgetary allocations, including plan and non-plan, but to also use the process to bring about an improvement in the performance, critical outcome indicators have to be developed and validated. Research inputs are important for this activity. A few additional steps are also needed to strengthen the budget lines and institutionalize the process to attain outputs and outcomes. The additional items to be included in the budget to institutionalize the process of attaining outputs and outcomes within a given time frame will have to be also identified, reviewed and firmed up.

11. Action Plan for Outcome-oriented Planning and Budgeting

Effective attainment of outcomes requires a strong collaborative effort of the three tiers of government in the Indian federal system. It is critical that Government of India initiate the partnership building process on a priority basis, cutting across vertical and horizontal barriers among ministries/departments and tiers of governments. One expected the Outcome Budget 2006–07 to present a roadmap and clear directives from the Planning Commission to provide specific outcome indicators and analysis based on these indicators for consideration in the annual plan proposals this year and the 11th Plan proposals, and provide thereby adequate incentive to install the process at the Central ministries and in the State and Local governments.

Capacity building of core teams at each level of government is a basic requirement and for the flagship programmes, a few operational models may be developed at the national level, which States may be encouraged to consider. The capacity building has to cover all the partners within the government. While the political leadership, including members of parliament, legislative assemblies, municipal corporations/councils and panchayati raj institutions, need to be sensitized on the utility value of an outcome planning and budgetary process and how that will empower them to reach out to their constituencies, senior administrative leadership should be equipped to install and use the process, and a core technical multi-disciplinary team be trained to develop scheme and programme-based outcome budgets, along with specific planning and progress tracking indicators.

At the level of a sector ministry, a series of tasks have to be taken up to transform its budgetary system from output orientation to outcome orientation. A few crucial preparatory activities are preparation of case studies, capacity building and development of data base:

Case studies are a basic foundation laying activity. These may be undertaken on:

causative factors of non-attainment of outcomes

roadblocks in implementation

financial analysis of existing programmes

costing of selected activities and sectors

evaluation of the effectiveness of expenditure and the level of partnerships in multi-sector and multi-ministerial programmes.

cost of addressing roadblocks

developing programme- and activity-specific operational and budgetary norms for allocations

M&E system with credible data, indicators, indicator products that would enable measurement of efficiency, productivity and effectiveness of the utilization of public funds and identify activities that would bring these into the operational matrix. Analysis of inter-sector linkages, both forward and backward (input-output analysis) for facilitating improved coordination and convergence of resource flows is equally important. Resource leveraging is another issue to be addressed to develop a selffinancing system, especially in social sector programmes.

Induction of four basic operational principles to promote efficiency, improve productivity, enhance quality, and improve the effectiveness of operations. These should guide the working of the budgetary provisions in line with outcome requirements.

The efficiency principle seeks to reduce budgetary salary provisions, accounting for a large percentage of the budget and the need for this is supported by low productivity per unit of employment. Some existing national or global norm may be taken as a benchmark or if required, specifically determined. A policy change, to bring in better utilization of budgetary resources may be considered through amalgamation of activities and inducting technology to reduce the work force and together with other initiatives, the efficiency indicators are expected to show improvements. The focus in the initial period of inducting efficiency in use of budgetary resources should be on cutting expenditures. The quality principle is critical to introducing components to improve quality of inputs, outputs and outcomes. A proportion of savings in budgetary provisions expected to be achieved through inducting efficiency, may be used to install quality-enhancing activities. The setf-sustaining principle seeks to encourage self-help financing by relating grants and subsidies to a matching mobilisation or contribution by the recipient agencies and the ratio of grant to matching contribution may be progressively altered. In due course, performance-linked incentives may be provided to operational manpower, to be financed from savings in budgetary provisions, to be made through the innovative changes in the preparation of the budget.

Recognising the wide range of operations for inducting efficiency, productivity and quality in the outputs and outcomes, expertise in several disciplines would be required. A multi-disciplinary team is needed to design and manage the process. As one of the tasks is to also build partnerships among a wide range of stakeholders, who provide the various inputs as well as among users of the outputs to bring about the outcomes, it would be desirable to have expertise in human resource management and negotiations.

Further recognizing that the volume of tasks is going to be substantial if the total budget is to be converted into an outcome budget, it may be desirable to consider, in the first instance, a few major flagship programmes and schemes, and subsequently extend the process. The criteria for selection of flagship activities have to be developed.

In this perspective, a participating Ministry, Department of Programme may have to decide:

How the operational and monitoring system can be changed?

What should be the new toolkit for the purpose - indicators, indicator analytical products, data base, in-house skills, among others?

How to develop in-house capability to establish and manage the new system?

What type of capacity building is required and at what levels’? How to select flagship programmes and activities?

How to institutionalize the process?

Outcomes of social change interventions: Making them effective