The Budget Trails: Tracking utilisation of funds at the district level
By: Open Budgets India
Tags: India, Budget, Public Finance

By Subrat Das

Over the last two decades, Central schemes across important sectors like education, health and nutrition, water and sanitation, agriculture and rural development, and social protection for the marginalised sections have been constrained by under-utilisation of available funds. Given the limited fiscal space available to the government and competing demands for public resources from a large number of sectors, India cannot afford constrained utilisation of the available budgetary resources in any sector. In order to monitor the performance of schemes at the district level, the District Development Coordination and Monitoring Committee (DISHA Committee) was instituted in August 2016. Despite this, problems in resource absorption in the social sector schemes have not been addressed comprehensively and dearth of evidence from the ground have impeded effective reforms.

In this context, we need to recognize that the process of implementation of social sector schemes can be broadly divided into two stages: the first is that of utilisation of fund outlays (i.e. budget allocations) for delivering outputs and services, while the second stage pertains to the use (or uptake) of publicly delivered outputs and services that over a period of time impacts the outcome indicators. It can be argued that the first stage tends to get constrained mainly by supply-side bottlenecks (like, delays and uncertainty in fund flow up to the service delivery level, under-utilisation of funds available for schemes, and poor quality of utilisation etc.), while the second stage gets affected both by supply-side factors (like, limited coverage, poor quality of outputs and services delivered) and demand-side factors (such as, need for changes in social behaviour, gaps in public awareness about the programmes, and so on). Addressing the supply-side bottlenecks alone will not suffice as long as there are challenges on the demand-side, but demand-side interventions alone will not suffice either.

A series of knowledge products brought out recently by the Centre for Budget and Governance Accountability (CBGA) and the Tata Trusts, called the Budget Trails, unpacks a host of common supply-side bottlenecks constraining the process of utilisation of budgets in the social sector programmes. CBGA and Tata Trusts carried out a two-year project focusing on the extent and quality of fund utilisation in ten Central schemes in 2017–18 and 2018–19, in five districts across four States (viz. Andhra Pradesh, Jharkhand, Maharashtra and Odisha), with the support of the District Administration in each of the selected districts. It would be worthwhile to take note of the insights and policy takeaways emerging from this comprehensive exercise, if we are serious about the budget outlays ultimately resulting in the development outcomes we are aspiring for.

The narrative that large proportions of allocated funds remain unutilised in the social sector schemes needs to be amended now; districts have shown considerable improvement in resource absorption capacity in most of the Central schemes compared to what is reported in the literature for earlier years. In schemes like SSA, ICDS, MGNREGS, NSAP, SBM-Grameen and NRDWP, the districts studied have reported impressive levels of utilisation of the funds available; with over 90 per cent fund utilisation reported for the financial years 2017–18 and 2018–19. There seems to be scope for more improvement in the extent of fund utilisation in schemes like NHM and MDM though. However, the quality of utilisation of funds (in terms of how even is the pattern of utilisation across blocks within a district, across different components of a scheme, and the distribution of total expenditure across the four quarters of a financial year) is not very satisfactory yet. The latter aspect needs a lot more attention in most of the social sector schemes.

Complex fund flow mechanisms need reforms; funds in some of the Central schemes in social sectors bypassing the District Treasury makes comprehensive assessment of the quantum of fund flow and utilisation in a district very difficult. Moreover, there doesn’t seem to be any advantage in the Autonomous Societies route of fund flow over the District Treasury route in terms of the pace of fund flow and utilisation in the schemes. Hence, there is a need for streamlining the fund flow mechanisms for expediting fund utilisation. District authorities should address the problems arising from delay in fund flow in some of the schemes by creating pools of revolving funds to enable short-term fungibility of resources across schemes. Too many checks and balances have resulted in constraining the implementation process in several social sector schemes — Union ministries and State Government departments need to provide more flexibility in scheme guidelines and norms (e.g. in selection of beneficiaries by district level implementing authorities); and state finance departments should enhance the delegation of financial powers to spending departments. There is also a need for addressing the gaps in availability of staff for implementation of programmes and their capacity (with regard to the changing guidelines in schemes, using technology etc.).

It would be worthwhile to note here that the limitations in resource absorption in the social sectors, at least to some extent, have resulted from the shortage of resources in those sectors (for recruitment of staff, in particular and their training) in the past. Hence, we need to recognize that the problems of under-funding and under-utilisation are interrelated. Moreover, there is an urgent need for improving significantly the budget and expenditure information architecture at the district level to improve transparency and accountability in the social sectors.

About the authors

Subrat works with Centre for Budget and Governance Accountability; views expressed here are personal.