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UPSC MainsPUBLIC-ADMINISTRATION-PAPER-I201420 Marks
Q15.

Identify the main elements of Program Budgeting, Output Budgeting and ‘New’ Performance Budgeting. What do they have in common with PPBS?

How to Approach

This question requires a comparative analysis of three budgeting techniques – Program Budgeting, Output Budgeting, and ‘New’ Performance Budgeting – and their relationship with Planning, Programming, Budgeting System (PPBS). The answer should define each technique, highlight its key elements, and then draw parallels with PPBS. A structured approach, using headings and subheadings, will be beneficial. Focus on the evolution of budgeting techniques and the shift towards performance-based budgeting.

Model Answer

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Introduction

Budgeting is a crucial function of public financial management, evolving from traditional line-item budgeting to more sophisticated techniques aimed at improving efficiency and effectiveness. Program Budgeting, Output Budgeting, and ‘New’ Performance Budgeting represent successive attempts to link funding to results. These approaches emerged as a response to the limitations of traditional budgeting, which focused primarily on inputs rather than outcomes. The Planning, Programming, Budgeting System (PPBS), introduced in the 1960s, laid the groundwork for these later developments by emphasizing a systematic approach to resource allocation based on national goals.

Program Budgeting

Program Budgeting, gaining prominence in the 1960s, shifted the focus from expenditure categories (line items) to ‘programs’ – groupings of activities designed to achieve specific objectives.

  • Key Elements:
    • Identification of Programs: Defining distinct programs based on objectives.
    • Program Structure: Breaking down programs into components and activities.
    • Cost Analysis: Determining the cost of each program and its components.
    • Performance Indicators: Establishing measures to assess program effectiveness (though often limited in early implementations).
  • Limitations: Often faced difficulties in accurately measuring program performance and establishing clear causal links between funding and outcomes.

Output Budgeting

Output Budgeting, developed as an improvement over Program Budgeting, emphasizes the tangible outputs produced by government activities. It focuses on ‘what’ is delivered rather than ‘how’ it is delivered.

  • Key Elements:
    • Focus on Outputs: Budget allocations are linked to specific, measurable outputs (e.g., number of students educated, kilometers of road constructed).
    • Performance Targets: Setting targets for output levels.
    • Cost per Output: Calculating the cost of producing each unit of output.
    • Monitoring and Reporting: Tracking actual outputs against targets.
  • Advantages: More concrete and easier to measure than program outcomes.
  • Limitations: May not fully capture the impact or quality of outputs.

‘New’ Performance Budgeting

‘New’ Performance Budgeting, emerging in the 1990s and 2000s, represents a further evolution, focusing on outcomes and impact. It incorporates elements of both Program and Output Budgeting but places greater emphasis on achieving desired results.

  • Key Elements:
    • Outcome-Oriented: Budget allocations are linked to specific, measurable outcomes (e.g., improved health indicators, reduced crime rates).
    • Performance Indicators: Robust performance indicators are used to track progress towards outcomes.
    • Benchmarking: Comparing performance against best practices.
    • Citizen Feedback: Incorporating citizen perspectives on service quality and outcomes.
    • Strategic Alignment: Linking budget allocations to overall government strategic goals.
  • Examples: The Government Performance and Results Act (GPRA) in the US (1993) and similar initiatives in the UK and Canada.

Comparison with PPBS

The Planning, Programming, Budgeting System (PPBS), introduced by Robert McNamara at the US Department of Defense in the 1960s, shared several commonalities with these budgeting techniques:

Feature PPBS Program/Output/Performance Budgeting
Focus Systematic analysis of national goals and resource allocation to achieve them. Linking funding to programs, outputs, or outcomes.
Planning Phase Defining national goals and objectives. Identifying program objectives and performance indicators.
Programming Phase Developing alternative programs to achieve goals. Structuring programs and defining outputs.
Budgeting Phase Allocating resources to programs based on cost-benefit analysis. Allocating resources based on performance targets and cost per output/outcome.
Emphasis Rational decision-making and resource optimization. Accountability, transparency, and performance improvement.

However, PPBS was often criticized for being overly complex and bureaucratic. Program, Output, and Performance Budgeting sought to address these shortcomings by simplifying the process and focusing more directly on results. PPBS laid the conceptual foundation, but the later techniques refined the approach and incorporated lessons learned from implementation.

Conclusion

Program Budgeting, Output Budgeting, and ‘New’ Performance Budgeting represent a progressive shift in public financial management, moving away from traditional input-based budgeting towards a more results-oriented approach. While each technique has its strengths and weaknesses, they all share a common goal: to improve the efficiency, effectiveness, and accountability of government spending. The legacy of PPBS is evident in these developments, providing a framework for linking resources to national priorities and measuring performance. Continued refinement and adaptation of these techniques are essential for ensuring that public funds are used wisely and deliver maximum value to citizens.

Answer Length

This is a comprehensive model answer for learning purposes and may exceed the word limit. In the exam, always adhere to the prescribed word count.

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Additional Resources

Key Definitions

Line-Item Budgeting
A traditional budgeting method that focuses on categorizing expenditures by input items (e.g., salaries, supplies) rather than programs or outcomes.
PPBS
Planning, Programming, Budgeting System – a systematic approach to resource allocation that emphasizes the identification of national goals, the development of programs to achieve those goals, and the allocation of resources based on cost-benefit analysis.

Key Statistics

According to a 2018 World Bank report, approximately 70% of developing countries have adopted some form of performance-based budgeting.

Source: World Bank, “Public Financial Management: A Review of Country Experiences” (2018)

A study by the Government Accountability Office (GAO) in 2005 found that while many federal agencies had adopted performance budgeting practices, few were consistently using performance information to make resource allocation decisions.

Source: GAO, “Performance Budgeting: Progress and Challenges” (2005)

Examples

New Zealand’s Performance-Based Budgeting

New Zealand pioneered performance-based budgeting in the 1990s, linking budget allocations to clearly defined outputs and outcomes. This system emphasized accountability and transparency, and served as a model for other countries.

Frequently Asked Questions

▶What are the challenges in implementing performance budgeting?

Challenges include defining appropriate performance indicators, collecting reliable data, establishing causal links between funding and outcomes, and resisting political pressures to prioritize short-term gains over long-term results.

Topics Covered

Public AdministrationEconomicsFinanceBudgetingPublic FinancePPBSPerformance Measurement
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