The Public Expenditure Management Is A Challenge T

**Subject:** Economy India's **Public Expenditure Management (PEM)** has emerged as a critical challenge in the post-liberalization era, particularly evident in the recent fiscal deficit of **5.87% of GDP in 2023**, highlighting the complexities of balancing development needs with fiscal prudence. ## Challenges in Public Expenditure Management **1. Fiscal Consolidation Pressure:** - Persistent high fiscal deficit with current levels at **₹11.70 trillion (74.5% of FY25 estimate)** poses challenges for sustainable public finance management. - The government faces the challenge of meeting the targeted fiscal deficit of **4.4% of GDP by 2025-26** while maintaining developmental expenditure. **2. Expenditure Quality Issues:** - Rising revenue expenditure compared to capital expenditure (**6.2% vs 17% increase in 2024-25**) indicates structural imbalances. - **Over-reliance on subsidies** and universal social assistance programs leads to inefficiencies and resource leakages. **3. Resource Allocation Inefficiencies:** - Inadequate targeting of welfare schemes affects optimal resource utilization. - Challenge of balancing **social sector spending** with fiscal discipline and economic growth objectives. ## Reform Measures and Way Forward **1. Expenditure Rationalization:** - Implementation of **Direct Benefit Transfer (DBT)** to reduce leakages and improve targeting. - Focus on outcome-based budgeting through **Output-Outcome Monitoring Framework**. **2. Structural Reforms:** - Adoption of **Medium Term Expenditure Framework** for better fiscal planning. - Enhanced focus on **capital expenditure** (projected **10.1% rise in 2025-26**) to boost economic growth. **3. Technology Integration:** - Use of **Public Financial Management System (PFMS)** for real-time expenditure tracking. - Implementation of **Government e-Marketplace (GeM)** for transparent procurement. The government needs to focus on implementing the **Fiscal Responsibility and Budget Management (FRBM) Act** effectively while ensuring quality public expenditure through better targeting and monitoring mechanisms, similar to Malaysia's targeted subsidy approach and Tanzania's improved resource management systems.