The government needs to adopt a multi-year expenditure outlook while preparing the budget for a financial year, Niti Aayog has suggested.
The government needs to adopt a multi-year expenditure outlook while preparing the budget for a financial year, Niti Aayog has suggested. Adoption of multi-year expenditure horizon framework, the Aayog said, would help in better realignment of expenditure priorities. “The Centre’s budget is set for an annual horizon. This means that revenue and expenditure are decided for the upcoming year. This is in contrast to most of the modern economies, which employ a multi-year horizon when preparing the budget. “Such an approach is essential for better realignment of expenditures to priorities since the room for realignment in one year is limited and the temptation in a one-year-horizon budget is to expand all expenditures more or less radially,” the government think tank said in its ‘Three Year Action Agenda, 2017-18 to 2019-20′.
Noting that the Fiscal Responsibility and Budget Management Act, 2003, requires the central government to prepare a medium-term expenditure framework, which sets three-year rolling targets for expenditure, the Aayog said, “There is, however, no obligation for the government to adhere to these targets during the actual budget.” “As such, till date, this exercise has not been taken seriously,” it added. Therefore, the Aayog asserted that the time is ripe for the government to adopt a credible medium-term expenditure framework (MTEF) for allocating expenditure.
Observing that in addition to making government expenditure more predictable and credible, the Aayog said the MTEF would also provide certainty to individual departments and ministries on available resources to them in the medium- term. “This will allow them to focus on the optimum utilisation of available resources,” it pointed out. On improving the tax administration system and minimising tax litigation, the Aayog noted that we need to enhance the tax boards’ capabilities to utilise the available information and modern ICT tools to ensure tax compliance.
“For this purpose, the boards (CBDT and CBEC) must be given considerable flexibility to bring outside technical staff laterally,” the Aayog said. The government think tank also stressed that “we must create a multidisciplinary unit within the Ministry of Finance that uses big data analytics and machine learning tools to leverage detailed data from the GSTN, income tax returns and TDS using PAN and Aadhaar numbers to identify the tax evasion activities”.