Total recall

Why Budget 2011 should be informed by previous instalments.

As Finance Minister Pranab Mukherjee presents the Union budget today,he will be held to promises from previous budget statements that remain unfulfilled. Among those,the most important one that stands out as having been postponed year after year is the Goods and Services Tax GST. The implementation of the GST requires setting up of a goods and services network and mapping out the way from a pilot to a steady state. The Technology

Advisory Group for Unique Projects headed by Nandan Nilekani has already submitted its report on the steps that need to be taken on the implementation of this complex project.

Earlier budget promises include setting up of the Debt Management Office DMO,or the

National Treasury Management Agency. While the UPA government announced the NTMA and set up a middle office for the DMO,very little progress has been made. The finance ministrys internal working group on debt management provided detailed steps for incubating the project,setting up IT systems,creating databases on debts and contingent liabilities and transferring the functions from RBI to NTMA. But it has been two years and this has not been implemented. The NTMA can be critical in bringing down the cost of government borrowing,very crucial at a time like this when the fiscal deficit is high and rising.

An Expenditure Information Network that can track government expenditure better is still pending. The existing system of government expenditure has enormous limitations. For example,measurement of plan implementation is on the basis of outlay rather than outcome. As the government follows hierarchical and multiple patterns for allocation and release of funds to the implementing agencies and beneficiaries,it is impossible to track the flow of funds to actual beneficiaries. It is equally difficult to evaluate the performance of agencies based on spending and project

implementation. The pension bill too is pending. The New Pension System suffers from many other problems as well. The finance ministry must not postpone steps towards convergence of all pension and provident fund streams,rationalisation of tax treatment of NPS to provide an even treatment with other retirement products and providers and creating awareness among subscribers.