IDEAS home Printed from https://ideas.repec.org/p/npf/wpaper/19-284.html
   My bibliography  Save this paper

Budget Credibility in India: Assessment through PEFA framework

Author

Listed:
  • Jena, Pratap Ranjan

    (National Institute of Public Finance and Policy)

  • Sikdar, Satadru

    (National Institute of Public Finance and Policy)

Abstract

The recent debate regarding likely shortfall of revenue receipts in the central government budget needs to be seen in the light of longer term assessment of budget credibility. The uncertainty in one year could be an outlier. A credible budget while respecting budget contracts voted in the parliament, also improves the efficiency of government expenditure. Deviations, as a result of weak capacity to forecast revenue, pose risks to both existing and future program management. The paper assesses the budget credibility at central government level since 2006-07 following the PEFA framework. The record of budget credibility is examined using the performance indicators that are acknowledged as international standards. The paper looks at revenue and expenditure at aggregate and decomposed level to understand the variance from the budget projection. While the deviation from projected revenue and expenditure at aggregate level was found to be low, there are concerns when fiscal variable are put through the budget credibility test at decomposed level. Strengthening the overarching public financial management system by effectively implementing the budget reform programs undertaken intermittently will further improve the credibility of budget.

Suggested Citation

  • Jena, Pratap Ranjan & Sikdar, Satadru, 2019. "Budget Credibility in India: Assessment through PEFA framework," Working Papers 19/284, National Institute of Public Finance and Policy.
    • Handle: RePEc:npf:wpaper:19/284
    Note: Working Paper 284, 2019
    as

    Download full text from publisher

    File URL: https://www.nipfp.org.in/media/medialibrary/2019/12/WP_284_2019.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Beetsma, Roel & Debrun, Xavier & Fang, Xiangming & Kim, Young & Lledó, Victor & Mbaye, Samba & Zhang, Xiaoxiao, 2019. "Independent fiscal councils: Recent trends and performance," European Journal of Political Economy, Elsevier, vol. 57(C), pages 53-69.
    2. James Brumby & Richard Hemming, 2013. "Medium-Term Expenditure Frameworks," Palgrave Macmillan Books, in: Richard Allen & Richard Hemming & Barry H. Potter (ed.), The International Handbook of Public Financial Management, chapter 10, pages 219-236, Palgrave Macmillan.
    3. World Bank, 2013. "Beyond the Annual Budget : Global Experience with Medium-Term Expenditure Frameworks," World Bank Publications - Books, The World Bank Group, number 11971.
    4. Allen Schick, 2011. "Repairing the Budget Contract between Citizens and the State," OECD Journal on Budgeting, OECD Publishing, vol. 11(3), pages 1-27.
    5. von Hagen, Jurgen & Harden, Ian J., 1995. "Budget processes and commitment to fiscal discipline," European Economic Review, Elsevier, vol. 39(3-4), pages 771-779, April.
    6. Addison, Douglas, 2013. "The quality of budget execution and its correlates," Policy Research Working Paper Series 6657, The World Bank.
    7. Mr. George Kopits & Mr. J. D. Craig, 1998. "Transparency in Government Operations," IMF Occasional Papers 1998/001, International Monetary Fund.
    8. Allen Schick, 2010. "Post-Crisis Fiscal Rules: Stabilising Public Finance while Responding to Economic Aftershocks," OECD Journal on Budgeting, OECD Publishing, vol. 10(2), pages 1-18.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jacob, Jannet Farida & Chakraborty, Lekha, 2021. "COVID-19 and Public Investment for Children: The case of Indian State of Karnataka," Working Papers 21/355, National Institute of Public Finance and Policy.
    2. Kaur, Amandeep & Chakraborty, Lekha S, 2021. "Covid19 and Public Finance for Children: A case study of State of Odisha, India," MPRA Paper 111924, University Library of Munich, Germany.
    3. Kaur, Amandeep & Chakraborty, Lekha, 2022. "Covid19 and Public Finance for Children: A case study of State of Odisha, India," Working Papers 22/368, National Institute of Public Finance and Policy.
    4. Jena, Pratap Ranjan & Singh, Abhishek, 2020. "Emerging Fiscal Priorities and Resource Concerns: A Perspective on Fiscal Management from Madhya Pradesh," Working Papers 20/303, National Institute of Public Finance and Policy.
    5. Jacob, Jannet Farida & Chakraborty, Lekha S, 2021. "Public Finance for Children: The case of Indian State of Karnataka," MPRA Paper 109520, University Library of Munich, Germany, revised Aug 2021.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jena, Pratap Ranjan, 2017. "Indian Variant of MTEF: The Scope and Opportunities to Develop an Effective Budget Planning Process," Working Papers 17/185, National Institute of Public Finance and Policy.
    2. Sanja Bach, 2020. "Fiscal councils’ impact on promoting transparency and accountability in public finance management," Public Sector Economics, Institute of Public Finance, vol. 44(3), pages 355-384.
    3. David Prušvic, 2010. "Evropská fiskální pravidla a jejich účinnost: prvních 15 let [European Fiscal Policy Rules: First 15 Years]," Politická ekonomie, Prague University of Economics and Business, vol. 2010(1), pages 51-69.
    4. Luc Eyraud & Xavier Debrun & Andrew Hodge & Victor Duarte Lledo & Catherine A Pattillo, 2018. "Second-Generation Fiscal Rules; Balancing Simplicity, Flexibility, and Enforceability," IMF Staff Discussion Notes 18/04, International Monetary Fund.
    5. Ardanaz, Martín & Ulloa-Suárez, Carolina & Valencia, Oscar, 2024. "Why don't we follow the rules? Drivers of compliance with fiscal policy rules in emerging markets," Journal of International Money and Finance, Elsevier, vol. 142(C).
    6. Pratap Ranjan Jena, 2017. "Indian Variant of MTEF: The Scope and Opportunities to Develop an Effective Budget Planning Process," Working Papers id:11564, eSocialSciences.
    7. Sacchi, Agnese & Salotti, Simone, 2015. "The impact of national fiscal rules on the stabilisation function of fiscal policy," European Journal of Political Economy, Elsevier, vol. 37(C), pages 1-20.
    8. Nada Azmy ElBerry & Stijn Goeminne, 2021. "Fiscal transparency, fiscal forecasting and budget credibility in developing countries," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 40(1), pages 144-161, January.
    9. Nouha Bougharriou, 2017. "Understanding Public Debt from a Political Economy Perspective," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 3, pages 379-389, September.
    10. Qiuxia Yang, 2020. "Fiscal Transparency and Public Service Quality Association: Evidence from 12 Coastal Provinces and Cities of China," JRFM, MDPI, vol. 14(1), pages 1-14, December.
    11. Borge, Lars-Erik, 2005. "Strong politicians, small deficits: evidence from Norwegian local governments," European Journal of Political Economy, Elsevier, vol. 21(2), pages 325-344, June.
    12. Marzia Romanelli & Pietro Tommasino & Emilio VadalÃ, 2022. "The future of European fiscal governance: a comprehensive approach," Questioni di Economia e Finanza (Occasional Papers) 691, Bank of Italy, Economic Research and International Relations Area.
    13. Russo, Massimo, 1998. "Policy coordination in the European Union (from the EMS to EMU)," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 34386, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    14. Hans Pitlik & Michael Klien & Stefan Schiman, 2017. "Stabilitätskonforme Berücksichtigung nachhaltiger öffentlicher Investitionen," WIFO Studies, WIFO, number 60595.
    15. Cronin, David & McQuinn, Kieran, 2021. "Are official forecasts of output growth in the EU still biased?," Journal of Policy Modeling, Elsevier, vol. 43(2), pages 337-349.
    16. Christopher Sleet, 2004. "Optimal Taxation with Private Government Information," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 71(4), pages 1217-1239.
    17. Rui Nuno Baleiras, 2014. "Towards predictability and sustainability of public finances: a commentary on 'Control of the Central Government Budget Outturn'," CFP Occasional Papers 02/2014, Portuguese Public Finance Council.
    18. Bessho, Shun-ichiro & Hirota, Haruaki, 2023. "Do public account financial statements matter? Evidence from Japanese municipalities," European Journal of Political Economy, Elsevier, vol. 78(C).
    19. Ehrhart, Karl-Martin & Gardner, Roy & von Hagen, Jurgen & Keser, Claudia, 2007. "Budget processes: Theory and experimental evidence," Games and Economic Behavior, Elsevier, vol. 59(2), pages 279-295, May.
    20. Wehner, Joachim, 2010. "Institutional constraints on profligate politicians: the conditional effect of partisan fragmentation on budget deficits," LSE Research Online Documents on Economics 28649, London School of Economics and Political Science, LSE Library.

    More about this item

    Keywords

    PEFA ; Budgeting System ; Multi-year Expenditure Framework ; Fiscal Rules ; Performance Budgeting;
    All these keywords.

    JEL classification:

    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:npf:wpaper:19/284. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: S.Siva Chidambaram (email available below). General contact details of provider: http://www.nipfp.org.in .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.