Day 54 – Q 3. Explain the legal and institutional measures in place to ensure the effective utilisation of public funds in India. What are the key challenges in this regard? Discuss. (15 Marks)

3. Explain the legal and institutional measures in place to ensure the effective utilisation of public funds in India. What are the key challenges in this regard? Discuss. (15 Marks)

भारत में सार्वजनिक धन के प्रभावी उपयोग को सुनिश्चित करने के लिए कानूनी और संस्थागत उपायों की व्याख्या करें। इस संबंध में प्रमुख चुनौतियां क्या हैं? चर्चा कीजिए।

Approach-

Candidates need to explain the legal and institutional measures in place to ensure the effective utilisation of public funds in India and then discuss the key challenges in this regard.

Introduction:

Properly managed accounting system helps ensure proper control over funds. Accounting policies and procedures are designed to compile accounts fulfilling legal/procedural requirements that govern financial control. Accounts are an essential part of financial management of activities. On the basis of accounts, the Government regulates the shape of its financial and fiscal policies. Efficient utilisation of public funds is necessary for judicious use of financial resources to satisfy the needs of the present society in such a way that it doesn’t compromise the capability of societies of future generations to meet their own needs.

The legal and institutional measures in place to ensure the effective utilisation of public funds in India

Properly managed accounting system helps ensure proper control over funds. Accounts are an essential part of financial management of activities. On the basis of accounts, the Government regulates the shape of its financial and fiscal policies. On the basis of accounts, the Government regulates the shape of its financial and fiscal policies.

• All the loans raised by the Government by issue of public notifications, treasury bills (internal debt) and loans obtained from foreign governments and international institutions (external debt) are credited into consolidated fund of India. All expenditure of the government is incurred from consolidated fund of India and no amount can be withdrawn from the Fund without authorization from the Parliament.
• The Contingency Fund of India records the transactions connected with Contingency Fund set by the Government of India under Article 267 of the Constitution of India. This fund acts more or less like an imprest account of Government of India and is held on behalf of President by the Secretary to the Government of India, Ministry of Finance, Department of Economic Affairs.
• In the Public Account constituted under Article 266 (2) of the Constitution, the transactions relate to debt other than those included in the Consolidated Fund of India. The receipts under Public Account do not constitute normal receipts of Government. Parliamentary authorization for payments from the Public Account is therefore not required.
• The CAG protects public funds from the reach of arbitrary power and, in that sense, is an important and most useful dignitary of the state. 
• The Pension Fund Regulatory and Development Authority (PFRDA) is the sole regulator of the pension industry in India. Its major objectives are to provide income security to the old aged by regulating and developing pension funds and to protect the interest of subscribers to pension schemes.

The Key challenges in this regard

• Systemic feebleness, manifested as shortage of trained, regular staff for various important roles like programme management, finance/accounts and frontline service provision; this contributed to weaken the capacities of the government apparatus in the States for implementation of Plan schemes.
• Lack of sufficient staff in government offices
• Improper technological penetration at grassroot level or ineffective decentralization of financial power
• Corruption leading to diversion of funds to unauthorised sources.
• Poor accountability mechanism preventing their effective monitoring and utilization.
• Ineffective decentralization of power
• Populist politics in the country, Crony capitalism, favouritism and misuse of office, lack of coherence in planning, etc.
• Expenditure rush during the month of March, popularly known as ‘March Rush’, which leads to unplanned and improper fund expenditure, to prevent lapsing of funds that have remained unutilized.
• Diversion of funds to other purposes.
• The deficiencies in decentralized planning being carried out in the schemes, resulting due to insufficient staff for undertaking planning activities, inadequate attention to their capacity building and minimal role for community participation in the planning process.

Conclusion

Efficient utilisation of public funds requires a number of reforms for good governance such as decentralisation of power, plugging legislative loopholes, strengthening the public Institutions like CVC and RTI, enhancing administrative accountability and making society more democratic. These reforms could make society more sustainable in the long run.