The public expenditure management is a challenge to the Government of India in context of budget making during the post liberalization period. Clarify it.

Why the challenge grew after liberalisation

• The old Plan–non-Plan split hid a simple fact: a large share of outlay is committed — interest, defence salaries and pensions, food–fertiliser–fuel subsidies, and statutory transfers. Discretion for new capital is thin.
• Liberalisation raised the political demand for safety nets and infrastructure at the same time as industrial licensing and many public-sector monopolies receded. The budget became the main remaining instrument.
• Tax reform (modvat to CENVAT, then Goods and Services Tax from July 2017) aimed at a wider base but created transition gaps, compensation promises, and uncertainty for States. Expenditure plans cannot be firm if receipts wobble.
• The Fourteenth Finance Commission raised States’ share of the divisible pool to 42 per cent. That was healthy federalism. It also tightened the Union’s room unless expenditure quality improved.
• FRBM (2003) and later reviews asked for deficit and debt paths. Escape clauses, off-budget borrowing through Food Corporation of India, National Highways Authority of India, and extra-budgetary resources made the printed deficit an incomplete map.

Concrete pressure points in budget-making

• Subsidies: food (National Food Security Act), fertiliser, and (earlier) fuel were poorly targeted; leakages meant expenditure without inclusion.
• Revenue expenditure crowding out capital expenditure: announcements of highways and rail need multi-year cash, not one Budget speech.
• Centrally sponsored schemes proliferated; States complained of rigidity while the Union still carried the political brand.
• Public Financial Management System (PFMS) and Direct Benefit Transfer improved tracing, but many departments still spend in a March rush.
• Outcome and gender budgets exist on paper; linking outlay to output is still weak, so expenditure management stays input-heavy.
• Populist loan waivers and unfunded State promises spill onto banks and, later, onto Union recapitalisation — a hidden expenditure cycle.

Clarifying the post-1991 specificity

• Before 1991, shortages and licences rationed the economy; after 1991, macro-fiscal credibility rations the budget because markets punish a loose deficit.
• The challenge is therefore not “too little spending” in the abstract. It is too little flexible, well-audited, capital-and-human-development spending inside a hard envelope of interest and subsidies.

What would ease it

• A true medium-term expenditure framework: three-year ceilings by ministry, with project-wise cash plans for infrastructure.
• Shift subsidies to DBT and income support where markets work; keep kind transfers where food markets fail.
• Bring off-budget liabilities onto one debt statement; honour FRBM in spirit.
• Fewer CSS, more block flexibility with outcome contracts.
• Protect capital and health–education from the March scramble; use PFMS stop-lists for parked funds.
• Independent expenditure evaluation (NITI, CAG performance audits) feeding the next Budget, not a shelf report.