Objectives of performance budgeting include improving expenditure prioritization, effectiveness and efficiency." Has performance budgeting worked effectively in governmental system? Argue.

Defining Performance Budgeting

Performance budgeting is a budgeting system where resources are allocated on the basis of past, present, and projected performance. It emphasizes the relationship between inputs (resources), outputs (activities), outcomes (results), and impact (long-term effects). Unlike traditional budgeting, which focuses on what is spent, performance budgeting focuses on what is achieved with the expenditure.

Objectives of Performance Budgeting

The core objectives of performance budgeting are:

• Improved Expenditure Prioritization: Allocating resources to programs and activities that demonstrate the greatest impact.
• Enhanced Effectiveness: Ensuring that programs achieve their intended objectives.
• Increased Efficiency: Maximizing the output achieved from a given level of input.
• Greater Transparency and Accountability: Making government spending more transparent and holding agencies accountable for results.
• Better Decision Making: Providing policymakers with information to make informed decisions about resource allocation.

Implementation in India

India adopted performance budgeting in a phased manner, starting with a pilot project in select ministries in 2005-06. The key elements of implementation included:

• Outcome Budget: Introduced alongside the annual budget, outlining the measurable outcomes expected from each ministry.
• Results Framework Document (RFD): A document outlining the objectives, targets, and performance indicators for each ministry.
• Monitoring and Evaluation: Establishing mechanisms to monitor progress towards achieving outcomes and evaluate the effectiveness of programs.
• DBT (Direct Benefit Transfer): Leveraging technology to ensure funds reach intended beneficiaries directly, enhancing efficiency and reducing leakages.

Successes of Performance Budgeting in India

Despite challenges, performance budgeting has yielded some positive results:

• Increased Focus on Outcomes: The emphasis on outcomes has encouraged ministries to think more strategically about their objectives.
• Improved Data Collection: The need to measure performance has led to improvements in data collection and analysis.
• Enhanced Transparency: The Outcome Budget and RFDs have increased transparency in government spending.
• DBT Success: Schemes like PM-KISAN and MGNREGA have benefited from DBT, reducing corruption and improving efficiency. (Statistic: As of November 2023, over ₹7.6 lakh crore has been transferred directly to beneficiaries through DBT - Source: DPIIT, Government of India)

Failures and Challenges

However, performance budgeting in India has faced significant challenges:

• Poor Data Quality: The quality of data used to measure performance is often unreliable, hindering accurate assessment.
• Difficulty in Defining Outcomes: Defining measurable outcomes for complex programs can be challenging.
• Lack of Capacity: Many government agencies lack the capacity to effectively implement performance budgeting.
• Political Interference: Political considerations can sometimes override performance-based allocation decisions.
• Siloed Approach: Ministries often operate in silos, making it difficult to achieve cross-sectoral outcomes.
• Focus on Outputs rather than Outcomes: Often, the focus remains on achieving outputs (e.g., number of schools built) rather than outcomes (e.g., improved literacy rates).

Comparative Analysis: Traditional vs. Performance Budgeting

Feature	Traditional Budgeting	Performance Budgeting
Focus	Inputs (what is spent)	Outputs & Outcomes (what is achieved)
Accountability	Spending within budget	Achieving performance targets
Decision Making	Incremental adjustments	Strategic resource allocation
Transparency	Limited	Enhanced through Outcome Budgets & RFDs

Recent Developments & Way Forward

The government is attempting to address these challenges through initiatives like the National Programme on Performance Assessment (NPPA) and strengthening the monitoring and evaluation framework. Further reforms are needed to improve data quality, build capacity within government agencies, and promote a more outcome-oriented culture. (Scheme: Mission Karmayogi, launched in 2020, aims to build capacity within the civil service to implement performance budgeting effectively.)