Why in the News?

• A Parliamentary Standing Committee has criticised financial planning by NITI Aayog and the Ministry of Planning for persistent underutilisation of budgetary allocations.

What’s in Today’s Article?

• NITI Aayog (Functions, Role in Governance, etc.)
• Parliamentary Committee’s Report (Key Observations, Recommendations by Committee, Broader Implications, etc.)

Role of NITI Aayog in India’s Governance

• NITI Aayog (National Institution for Transforming India) serves as the government’s premier policy think tank.
• Established in 2015, it replaced the Planning Commission with the objective of promoting cooperative federalism and evidence-based policymaking.
• Its key functions include:

• Designing long-term policy frameworks
• Monitoring and evaluating government schemes
• Providing strategic and technical advice to the Centre and States
• Facilitating innovation and development initiatives

• Although NITI Aayog does not directly allocate funds like the erstwhile Planning Commission, it plays a crucial role in shaping development priorities and ensuring efficient utilisation of public resources.

Parliamentary Committee’s Observations

• The Parliamentary Standing Committee on Finance has raised serious concerns regarding financial management by the Ministry of Planning and NITI Aayog.
• The Committee found that the Ministry consistently spent significantly less than the budget allocated to it. Key findings include:

• In 2023-24, actual expenditure was about Rs. 290.81 crore against a Budget Estimate (BE) of Rs. 824.39 crore (around 35%).
• In 2024-25, expenditure stood at Rs. 282.61 crore against a BE of Rs. 837.26 crore (around 34%).

• This pattern indicates a structural issue in planning and execution, where funds remain idle instead of being effectively utilised.
• Rising Budget Allocations Despite Low Spending
  • Despite the low utilisation rates, the Ministry continued to seek higher allocations.
  • The Ministry requested 1,203.38 crore for 2026-27, which is about 22% higher than the previous year’s allocation.
• The Committee questioned this trend, noting that increasing allocations without proper utilisation reflects poor fiscal discipline.

Weak Implementation and Planning Gaps

• The Committee highlighted that the problem is not merely financial but also administrative.

• There is dismal implementation of planned activities on the ground.
• The Quarterly Expenditure Plan (QEP) shows persistent gaps between planned and actual spending.

• This indicates that schemes and initiatives are either delayed or inadequately executed.

Issues in Expenditure Management

• One major concern raised by the Committee is the tendency to spend large amounts in the final quarter of the financial year.
• In 2025-26, a significant portion of spending was projected in the fourth quarter.
• This creates a “rush to exhaust funds,” which can compromise the quality of expenditure.
• Such practices may also violate government norms that aim to distribute spending evenly throughout the year.

Violation of Fiscal Discipline Norms

• The Central government has guidelines to ensure balanced expenditure patterns, including limits on monthly spending.
• The Committee warned that excessive spending in the last quarter may breach these norms, leading to:

• Inefficient allocation of resources
• Reduced accountability
• Poor outcomes from public expenditure

Recommendations by the Committee

• The Parliamentary panel has made several recommendations to improve financial management.
• Realistic Budgeting
  • Accurate estimation of expenditure
  • Avoiding inflated budget demands
  • Aligning allocations with actual requirements
• Strengthening Monitoring Mechanisms
  • Conduct regular internal reviews
  • Ensure timely administrative approvals
  • Synchronise planning with expenditure targets
• Better Utilisation of Funds
  • Avoid idle funds and resource blocking
  • Ensure the timely implementation of schemes
  • Improve coordination between planning and execution

Broader Implications for Governance

• The issue of underutilisation of funds reflects deeper challenges in public financial management in India.
• Impact on Development Outcomes - Inefficient use of funds can delay development projects and reduce the effectiveness of government programmes. This ultimately affects service delivery and economic growth.
• Fiscal Responsibility and Accountability - Proper financial planning is essential for maintaining fiscal discipline. Persistent underutilisation, coupled with rising allocations, undermines accountability in public spending.