Rangarajan panel suggests recast of budget accounting

A panel set up by the union government has suggested sweeping changes in the process of India's annual budgets, including doing away with the distinction between 'Plan' and non-Plan expenditure in both central and state budgets.

The team, headed by the prime minister's economic advisor C Rangarajan set up to suggest ways of making management of public expenditure more efficient, has recommended a more holistic and comprehensive way of categorising such expenditure.

"Over a period of time, several issues have cropped up from the distinction between Plan and non-Plan, making it dysfunctional and an obstacle to outcome-based budgeting," Rangarajan told the media on Thursday.

If taken seriously, the panel's recommendations would reduce the role of the Planning Commission, which makes five-year budget outlay plans. The panel is officially headed by the prime minister; but the vice-chairman has a more important role to play in drawing up the country's five-year targets.

The current vice-chairman of the commission is Montek Singh Ahluwalia, who is said to be close to Prime Minister Manmohan Singh and his key economic advisors in the union cabinet.

The Rangarajan committee has suggested continuing with the revenue and capital expenditure classifications to ensure optimal use of government borrowings.

The reforms will require a reorientation of the roles of the ministry of finance and the planning commission, the Rangarajan report adds.