Why India needs a PBO

The Financial Express, April 11, 2014

A Parliamentary Budget Office will help strengthen regulatory oversight of fiscal decisions of the government

The requirement for legislative approval of financial measures is a democratic instrument enshrined in the Indian Constitution. This allows the legislature to keep a check on the government?s spending of public resources. However, there is a sharp disconnect between the formal power and the actual budgetary role of the legislature. A key reason for this disconnect may be because of the design of parliamentary democracies which limit the power of legislatures to either reverse or amend the budget. Other structural reasons for the disconnect may be the limited capacity of legislators to scrutinise fiscal matters, lack of access to in-depth budgetary information and limited time to scrutinise the budget. Over the years, this has adversely impacted the time spent by MPs on scrutinising the budget.

This indicates an abdication of responsibility by Parliament of one of its most crucial functions and does not bode well for the country?s future. While the issues related to the design of parliamentary democracies may be difficult to change, the structural issues can be addressed by putting in place certain measures to help parliamentarians scrutinise fiscal policies in a more robust manner. To that end, this article proposes that Parliament take the initiative in establishing a Parliamentary Budget Office (PBO), which would strengthen the former in carrying out its role of financial oversight.

The concept and the need for such an office in India is discussed here with some examples of PBOs in other countries.

What is a PBO?

PBOs are non-partisan research bodies that provide legislators with neutral and high-quality analysis of fiscal matters that is independent of the executive. Typically, they focus on analysing the full budget cycle, the broad fiscal challenges facing the government and the financial implications of legislative proposals.

A PBO may be established as a statutory body under the direct control of Parliament with a clear set of deliverables. The body could be run as an autonomous institution with an independent board of directors. The head of the PBO should testify before a parliamentary committee on all fiscal matters. PBO should also be subject to audit scrutiny to ensure accountability.

The key advantages of having such a body are: (a) it can raise the quality of debate and scrutiny in Parliament as well as enhance fiscal discipline; (b) it can address the information asymmetry by breaking the executive?s monopoly on information; (c) the information would be available to both majority and minority.

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