18.4        ndian    onom
     Economic Advisory Council), in September 2011              (i) Plan expenditure tends to get
     suggested for redefining Plan and Non Plan                     priority especially when austerity and
     expenditures as Capital and Revenue expenditures,              expenditure reduction has to be done
     as the former set of terms ‘blur the classification’           periodically for fiscal consolidation.
     —this will facilitate linking expenditure to                   Non-Plan expenditure gets the cut
     ‘outcomes’ and better public expenditure, the                  even if it is vitally needed for economic
     panels suggested. Major suggestions of the Panel               development, an example is budget
     are:                                                           provision for maintenance of assets such
           (i) Plan     and      Non-Plan      distinction          as hospitals, schools and irrigation dams
               in the Budget is neither able to                     already created under Plan, but whose
               provide a satisfactory classification of             maintenance is treated as non-Plan.
               ‘developmental’ and ‘non-developmental’         (ii) Review and implementation of schemes
               dimensions of government expenditure                 is another area of direct responsibility
               nor an appropriate budgetary framework.              for the Ministry of Finance and the
               It has therefore become ‘dysfunctional’,             Ministry of Statistics and Programme
          (ii) Suggests for redefining the roles of the             Implementation. The Finance Minister
               Planning Commission (PC) and the                     himself had, in the budget speech for
               Finance Ministry (FM). According to                  2005–06, promised to ensure that
               which the PC should be responsible for               programmes and schemes were not
               formulation of the five-year plan and the            allowed to continue indefinitely from
               task of firming up the annual budgets                one Plan period to another without an
               should be entrusted to the FM.                       independent and in-depth evaluation.
         (iii) The PC should dispense with the exercise             The Planning Commission, serving as the
               of approving annual plans of states and it           focal point for Plan allocations, dilutes the
               could hold a strategy or review meeting              role of the Finance Ministry in this case.
               with representatives of the states.            (iii) ‘Output’ and ‘Outcome Budgeting’ was
         (iv) Public expenditures should be split into              introduced by the Central Government
               capital and revenue expenditures.                    from the Budget for 2005–06. Non-Plan
                                                                    expenditure remains out of its purview.
          (v) Public expenditure should have
                                                                    This means, for example, the outcome
               ‘management approach’ based on
                                                                    of expenditure on running schools and
               measurable ‘outcomes’, indicating that
                                                                    hospitals will not be evaluated. This again
               the reponsibility should be assigned to
                                                                    is another fallout of the artificial division
               the FM.
                                                                    into Plan and non-Plan.
     Analysis of the Situation: While the need for              This classification used to adversely affect
     looking beyond the budget is well accepted,           the whole budget process, formulation and
     there are many factors raising doubts on the          implementation. Looking at this anomaly, the
     ‘efficacy’ and ‘relevance’ of the five-year plans     Government switched over from the ‘plan’
     as the instrument. The division of expenditure        and ‘non-plan’ classification of expenditure to
     between Plan and non-Plan is artificial and creates   ‘revenue’ and ‘capital’ since the fiscal 2017-18 (as
     problems, such as :                                   announced in the Union Budget 2017-18).