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Public Finance Management

The Controller General of Accounts (CGA), Department of Expenditure, Ministry of Finance, Government of India developed and implemented the Public Financial Management System (PFMS), a web-based online software programme. In order to track money issued under all Plan programmes of the Government of India and to report expenditures in real time at all stages of programme execution, PFMS was launched in 2009. The scope was later broadened to include direct beneficiary payments made under all Schemes.

Significance in Governance:

  • The Public Finance Administration (PFM) is concerned with the mobilisation of resources and the management of government expenditures.
  • It entails resource mobilisation, programme prioritisation, the budgetary process, effective resource management, and the exercise of controls.
  • Managing the public finances is one of the important processes of governance.
  • Reforms in the financial management system are a core part of the governance reforms in achieving the national development objectives.

List of Issues in Utilisation of Public Funds: 

  • Corruption in the form of Acquiring Benami properties, holding black money in Swiss banks and money laundering.
  • Implementation of Multiple schemes on a single issue by the Centre and States leads to the division of funds and energy.
  • Then there is an issue of wrong priorities. E.g. It was argued that instead of organising significant sporting events like the commonwealth games, the government should first focus on improving the basic sporting infrastructure in India.
  • There is a proliferation of centrally sponsored schemes.
  • Also, it has been observed that there is a considerable delay in receiving funds from the implementing agencies because detailed documentation is required to receive funds.
  • The transfer of Central resources to States through various types of schemes and multiple modes of transfer has posed problems in obtaining a comprehensive overview of transfers to States and effective monitoring of expenditure. There are also issues concerning the accountability of funds directly transferred to implementing agencies in the States.
  • Misuse of funds in the name of organising the political rally, advertisements in newspapers and advertisements in the newspapers favouring our politicians cost a great deal of money.
  • There are hoardings and ceremonial gates all over the city because an office-bearer of a political party is visiting the city. That is the way of dictatorships.

Suggestion for Better Utilisation of Funds:

For the judicious use of financial resources t satisfy the demands of today’s society whil not risking future generations’ ability to meet their own needs, efficient use of public monies is essential.

Power decentralisation, addressing legislative gaps, strengthening public institutions such as the CVC and RTI, enhancing administrative accountability, and making society more democratic are all necessary for the efficient use of public monies. These changes have the potential to make society more long-term sustainable.

What Steps can be taken to better utilised Public Funds:

  • Avoid irrational freebie distribution: Irrational freebie distribution & writing off loans must be avoided for electoral popularity as it puts a strain on the budgetary balance.
  • Put an end to politicised protests: Any political faction should avoid frequent illintentioned protests and bandhs because they increase the costs incurred due to delays in public works projects.
  • Policy paralysis must be addressed: Delays, inertia, and the government’s or its many agencies’ and departments’ failure to make policy decisions are all important stages in making better use of public monies.
  • Inadequate political will must be avoided: The Members of Parliament Local Area Development Scheme (MPLADS) has recently been suspended for two fiscal years due to inefficiency & underutilization of funds. The MPLADS funds must be used in an appropriate way.
  • Red tape should be avoided at all costs: Overregulation, as well as the practice of requiring unnecessary paperwork and time-consuming procedures prior to official action, obstructs the implementation of schemes and projects, affecting the process of effective public fund usage. This should be avoided at all costs.
  • Public participation must be increased: Many citizens (particularly the poor) have been unable to demand their rightful financial advantages from the government due to illiteracy and misunderstanding of government policies and programmes, resulting in inefficient use of public monies.
    • Provide autonomy to public watchdogs like CVC, RTI, etc.: The autonomy must be given to the public watchdogs for better utilisation of public funds.
  • A citizen charter should be implemented: Many public institutions have yet to adopt a citizen charter, a tool of good governance for providing citizens with timely access to public services as rights. The failure to approve a citizen charter obstructs the effective use of public expenditures. As a result, thorough execution of a citizen charter is required.
  • Corruption-related social apathy must be addressed: In India, many people accept corruption as the norm, and those with illgotten wealth are treated the same as the honest wealthy. This is in contrast to some nations, such as Japan, where corrupted people have been subjected to societal boycotts.
  • An effective education system is required: If the educational system fails to teach its students the moral ideals of honesty and integrity, they will misuse power and public finances when they become public employees later in life.
  • Equality for everyone: In Indian society, social & economic inequality encourages people to amass as many resources as possible when given the opportunity. Corruption is also seen in the use of public funds at the community level, such as in Panchayats.
  • Proper Institutional Social accounting is required: The process of conveying the social and environmental repercussions of government acts and inactions to specific interest groups within society, such as in the MNREGA scheme, is not institutionalised.