The Silver Lining

In late February of every year, I get ready to be disappointed by the budget speech of the Indian Finance Minister. The reason is that, despite ample evidence that there are serious problems with the productivity of public spending in health, education and other areas, the budget speech always announces an increase in spending on these sectors, with little attempt—if any—at making that spending more efficient at reaching poor people. And this despite the fact that the Finance Minister himself was once quoted as saying, “You do not repair a leaking water supply pipe by stepping up the water pressure.” This year, however, I was not disappointed because, alongside the usual increase in spending, the budget speech announced, for the first time, the establishment of a Central Plan Schemes Monitoring System that would monitor and evaluate the large sums of money disbursed by the Central Government. The information generated by monitoring systems such as these could help build political support for the reforms needed to make public spending more effective. As Minister Chidambaram said, “I think we do not pay enough attention to outcomes as we do to outlays; or to physical targets as we do to financial targets; or to quality as we do to quantity.”