“Laws, like sausages, cease to inspire respect in proportion as we know how they are made.” – John Godfrey Saxe

The Union budget is a major spectacle every year. The Finance Minister poses proudly with his briefcase and fills his speech with quotes from his favourite authors; the opposition points out various flaws and declares the budget to be a dud; and analysts spend much airtime and ink discussing what it says. Budgets in the states, however, get far less attention not only from the media, but even from state legislatures, whose job it is to pay attention! This blog takes a closer look at the arcane details of how state assemblies deal with budgets.

Budgets hold a position of critical importance in the modern democratic state. The revenue and expenditure proposals of the executive are required to be presented before the legislature of the people’s representatives, which has authority to amend, reject, or approve them. The legislature thus exercises control of the executive’s actions through two channels: the first direct one being its ability to modify and approve the budget. A second, indirect mechanism of control is the process of publicly formulating, discussing and passing the budget; which gives citizens an opportunity to assess and evaluate the government’s plans for the coming year.

This theoretical picture is marred by many blemishes in reality. In parliamentary democracies in particular, direct legislative control is often reduced to a formality, as the party which controls the government also holds a majority in the legislature. Even the opportunity to amend the budget, known as a “cut motion” in parliamentary jargon, is perceived as a loss of confidence in the government: and is thus disallowed by the majority. The approved legislative budget, thus, is largely identical to the proposal submitted by the executive.

Similarly, many constraints hamper the indirect control of the legislature: its ability to examine the budget, evaluate its shortcomings and discuss them transparently. No survey of Indian states’ capacities exists, but a survey of sub-Saharan African countries^[1] lists many deficiencies:

• mechanisms of fund flow outside the formal budget such as foreign aid for specific projects;

• legal constraints on parliamentary oversight;

• capacity constraints as legislatures lack technical support to analyse complex budgets and audit documents;

• a political culture which views criticism of budgetary proposals as a threat.

Many of these will resonate with us here in India. The lack of adequate budget analysis by legislatures is acute in the states, and can be clearly seen by analysing legislative proceedings. The number of days on which the legislature sat between the budget speech and its enactment in the Assembly was, for example, 2 days in Kerala, 3 in Madhya Pradesh, and zero in Rajasthan and Haryana. Discussions on the general budget were held for 4 hours in Bihar, 11 in Kerala, 17 hours in Himachal Pradesh, and 8 hours in Haryana. ^[3,5]
Some assemblies discussed grants for individual ministries at length: Bihar and West Bengal had discussions for 60 and 80 hours each, while Madhya Pradesh discussed it for 11 hours and Kerala incorporated it in the 11 hours of general discussions. Some assemblies, such as Haryana and Himachal Pradesh, did not discuss individual grants at all.^[3,5]

An important institutional mechanism by which legislators gain expertise on policy issues is through the permanent or standing committee: a body which enables specialisation. All state legislatures have constituted standing committees; but these are mainly restricted to the Public Accounts Committee, the Committee on Government Assurances, and similar committees mirroring those which existed in the Union Parliament upon its constitution in 1950. Many states, such as Madhya Pradesh, Karnataka, Tamil Nadu and Rajasthan lack permanent department-related standing committees, despite their presence in the Union Parliament. Thus, the budget is referred to temporary committees which dissolve after the budget is enacted. Some states, such as Haryana and Rajasthan do not refer the budget to legislative committees, whether permanent or temporary.^[5]

Another mechanism by which legislative control over funds is weakened is Article 205 of the Constitution. This Article enables the executive to spend funds in excess of the authorized budget, provided post-facto legislative approval is obtained in the form of an “excess grant”. This weakens the reliability of budget figures, as funds additional to the approved budget can be granted unilaterally by the executive under the implicit assumption of post-facto legislative authorisation. There are even cases where the excess amounts are never explicitly laid before the legislature and authorised: audit reports of the Comptroller and Auditor General of India estimate that such unauthorised sums amounted to Rs. 2.65 lakh crore across states from 1950-51 to 2004-05. ^[2]

These figures also vary widely across states and time: Andhra Pradesh had Rs. 9,3003 crores of unauthorised expenditure in 2003-04, but only Rs. 15 crore in the subsequent year. Also in 2003-04, the small state of Himachal Pradesh had unauthorised expenditure of Rs. 4,516 crores, outstripping Uttar Pradesh which had a more modest figure of Rs. 3,645 crores.

State government expenditures were 15.0% of the national GDP in 2011-12, as compared to Union government expenditure which was 11.9%^[4]. The overwhelming focus on the Union budget masks the fact that budgetary controls and accountability is weak in the States, which comprise the majority of public expenditure. Legislative control of budgets is a fundamental tenet of accountability. Its reduction into ritual risks reducing the robustness of Indian democracy as well.

References:

1. Toward an Accountable Budget Process in Sub-Saharan Africa: Problems and Prospects: Kristin McKie and Nicolas van de Walle in Social Research, Vol. 77, No. 4, pp. 1281-1310

2. Legislature’s Supremacy and Executive’s Excess:Dharam Vir in Economic and Political Weekly, Vol. 42, No. 7 (Feb. 17-23, 2007), pp. 561-563

3. Vital Stats series: PRS Legislative Research

4. Economic Survey 2013-14: Ministry of Finance, Government of India

5. Proceedings of various state legislatures, accessed on their websites