Context

  • A Parliamentary Budget Office would help MPs provide effective oversight.

Parliamentary Budget Office (PBO)

  • A Parliamentary Budget Office (PBO) is an independent and impartial body linked directly to Parliament that provides technical and objective analysis of Budgets and public finance to the House and its committees.

Main Functions

  • Its core functions include Budget approval, scrutiny of its implementation, and holding the government to account.
  • Indian Parliament lacks the capability to perform such functions effectively, therefore, the result is often an arbitrary taxation policy, burgeoning fiscal deficit, and an inequitable allocation of public resources.

Indicators

  • Multiple indicators suggest that executive-led budgetary governance has not been successful in India.
  • The unequal distribution of public resources is a prevalent issue. Despite high economic growth, India suffers from inexcusable income inequality, poverty, unemployment, malnourished children, preventable diseases, systemic corruption, and underinvestment in key social services such as health and education.
  • Budgets can be seen as ‘contracts between citizens and the state’ or as ‘treaties among citizens negotiated through politics’.
  • Indian political economy literature fails to adequately address the role of Parliament and State legislatures in public finance management.
  • The role of Parliament and State legislatures in budgetary decision-making and oversight is far from satisfactory; it is meaningful to have a well thought-out legislative-executive balance of power in budgetary governance.

Indian Parliament as a Budget-approving body

  • The Indian Parliament is a Budget-approving body contributing to budgetary matters in the following notable ways: presentation of the Budget;scrutiny of the demands for grants of various ministries;debate;consideration and approval of the Budget.
  • To carry out these functions effectively, Parliament requires institutional, analytical and technical competence.
  • Parliament as a Budget-approving body, makes it compulsory for its members to be well-informed for a legitimate approving process.
  • Establishing a PBO within Parliament is undoubtedly necessary as an instrument for addressing bias towards spending and deficits and, more significantly, for enhancing fiscal discipline and promoting accountability.
  • It can also generate quality public debate on Budget policy and public finance, enabling parliamentarians to engage meaningfully in the Budget process.

Role of BPO

  • Independent and objective economic forecasts;
  • Baseline estimate survey;
  • Analyzing the executive’s Budget proposal;
  • and providing medium- to long-term analysis. Costing is standard practice for many PBOs.
  • A PBO can present either its own independent economic forecast or it can validate the government’s, providing an objective analysis on the official forecast.
  • A PBO can perform other tasks depending on its mandate, resources and requirements of parliamentarians or committees.
  • These may include general economic analysis, tax analysis, long-term analysis, options for spending cuts, outlining a budgetary framework that reflects priorities of the nation, bespoke policy briefs.

PBO, a different concept altogether

  • A PBO is different from general parliamentary research services and information wings.
  • It also differs from finance committees and the Public Accounts Committee.
  • A PBO is comprised of independent and specialized staff, such as Budget analysts, economists, public finance experts.
  • The PBO must be non-partisan, independent and mandated to serve all parliamentarians.
  • The core functions of the PBO should be codified in law. Its output, and the methods by which those outputs are prepared, must be transparent, accessible and understandable.

Responsibility on parliamentarians

  • Parliamentary scrutiny of public finance is an important aspect of governmental accountability.
  • There is a legitimate democratic need in this country to strengthen the capacity of Parliament and its members.
  • An unprecedented change has taken place in the way citizens view the government’s stewardship of taxpayer resources.
  • This demands a consideration of global standards and best practices to promote financial and budgetary transparency.
  • Parliamentarians have a role in establishing the PBO. As representatives of the people, they can help improve Budget policies by providing inputs on public needs and priorities.
  • A PBO can ensure that parliamentarians are well-informed to perform their budgetary and oversight functions effectively.
  • A PBO in Parliament will have a positive impact on the House’s ability to carry out budgetary oversight and fiscal decision-making.
  • PBO is likely to attract opposition from the bureaucracy as any aspect of strengthening Parliament (or State legislatures) has always been unwelcome and met with less consideration from the executive.
  • Parliament, with its long-standing traditions of non-partisan legislative services to MPs in India, will find more favourable consensus among all parties for the proposal to establish a PBO.

Key Challenges

  • Any country that establishes a PBO faces challenges that are threefold—guaranteeing independence and viability of the office in the long-run; ability to carry out truly independent analysis; and demonstrating impact.
  • Countries have adopted different models to suit their specific needs.
  • India will need to ensure the independence and non-partisanship of such a body for it to have credibility with legislators.
  • This may best be done if it is established as a statutory body reporting directly to Parliament. A clear set of deliverables may be desirable.

 

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