Jaitley puts in place spending reforms

Devolution of powers to lift GDP growth by 0.5-1 percentage point

October 22, 2014 12:59 am | Updated May 23, 2016 04:13 pm IST - New Delhi

Union Finance Minister Arun Jaitley has rolled out reforms aimed at the efficient management of government expenditure through speedy project approvals, decentralisation of more financial powers to Ministries and reduced transaction costs.

The Finance Ministry estimates that the resultant savings on time and cost overruns could lift the Gross Domestic Product (GDP) growth by 0.5-1 percentage point.

The administrative Ministries are beginning to take advantage of the new rules that have been in place for about a month now.

These Ministries have got a four-fold increase in the powers for approving expenditure without seeking the Finance Ministry’s nod. The Secretary of an administrative Ministry can now approve schemes and projects that cost up to Rs. 100 crore, up from the present Rs. 25 crore. The Union Cabinet’s approval will be needed only for those that cost more than Rs. 1,000 crore, not Rs. 300 crore.

The proposals attempt to address the issue of quality of government spending through the stipulation that all schemes and programmes be monitored and evaluated in terms of “measurably defined” outcomes, an improvement over the outcomes policy of the Manmohan Singh government. “Since it is the schemes and projects expenditure part of the Budget that tends to be growth-enhancing, this reform will add about 0.5-1 percentage point to the GDP growth,” a highly placed government source told The Hindu .

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