'UPA routinely changed fiscal practices...': Nirmala Sitharaman, says Modi govt reshaped Budget in last decade

Finance Minister Nirmala Sitharaman said the Modi government has reshaped the Union budget in the last 10 years from a mere record of expenditures to a strategic blueprint for equitable distribution.

The Union minister stressed that the government would continue to maximise the value of taxpayers' money by putting it to the best possible use.

In a series of posts on X (formally Twitter), she highlighted how the Modi government prioritised transparency in its budgeting practices and numbers. Countries with transparent budgets are often viewed more favourably by international bodies such as the IMF and World Bank. This can lead to improved global trust, she wrote.

"This starkly contrasts the @INCIndia-led UPA government's repetitive practice of hiding the deficits through off-budget borrowings and issuance of 'Oil Bonds', which somewhat covertly shifted the fiscal burden to future generations. Under UPA, standard fiscal practices were routinely changed to make Budget numbers look favourable," one of her posts read.

Sitharaman said the last decade has witnessed a substantial improvement in the sanctity and credibility of the Union Budget, leaving past constraints and archaic practices behind. Here is a breakdown of her posts.

Advancing Budget cycle

The Budget presentation that now takes place on Februray 1 has effectively advanced the expenditure cycle by 2 months and ensured that ministries have the full Budget available from the start of the financial year, that is April 1, she wrote. "This helped states plan their budgets better as details of Centre’s fiscal plan is available to them earlier than before."

Merger of Rail Budget

The FM said there was no 'sound administrative reason' for a Rail Budget and merging it with the Union Budget in FY18 presents a 'holistic & transparent picture'. "Number of Demands for Grants operated by Railways has been reduced from 16 to one, and appropriation for Railways is part of the main Appropriation Bill," she wrote

Plan and Non-Plan Classification Removed

Doing away with the distinction between Plan and Non-Plan expenditure has shifted the focus on revenue and capital expenditure, Sitharaman said.

The two categories created 'artificial distinction', thus distorting perception of the two types of allocations, FM said. Plan was considered ‘good’ and often referred to as Developmental expenditure, while Non-plan was considered ‘bad’ and wrongly signified ‘non-developmental outlays’. This distinction and perception were incorrect as there was a reluctance to allocate for ‘non-plan expenditure’, which comprised important items defence systems, pension and insurance, welfare measures and subsidies for the poor and underprivileged, etc, she added.

Focus on transparency

The FM also underscored the present government's emphasis on transparency in its budgeting practices and numbers in contrast to the UPA government’s practice of off-budget borrowing and ‘Oil Bonds’. These practices 'somewhat covertly shifted the fiscal burden to future generations', she said.

"Under UPA, standard fiscal practices were routinely changed to make Budget numbers look favourable", she claimed. Transparent budgets, FM said, are looked upon more favourably by the likes of IMF and the World Bank, and leads to better global trust.

Budget allocations to Road Transport and Railways have been ramped up significantly from FY23 onwards reducing dependence on market borrowings.

Supplementary Demand for Grants

From FY 2022-23, it was decided to limit the number of Supplementary Demands for Grants to two, now presented during Winter and Budget Sessions. This has made substantive improvements in the process of budget estimation and improved financial discipline, she wrote.

Bigger corpus of Contingency Fund

FM Sitharaman highlighted the meagre amount of Rs 500 crore over the years despite an exponential increase in the Centre's Budget expenses over the years. "This squeeze was felt during Covid-19 years, and then on, the corpus of the has been raised to Rs 30,000 crore in FY22," she said.

Expenditure Efficiency

The Finance Ministry has also taken up steps to improve expenditure efficiency by reducing unspent and parked funds. A Treasury Single Account (TSA) reform was introduced in 2017-18 to eliminate bulk releases to various Autonomous Bodies. This 'just-in-time' release of funds lowered the borrowing costs for the government. "It is important to mention that even the large agencies such as ICMR, UGC, BSNL, NHAI etc., are receiving funds from the government through TSA," she wrote. TSA has resulted in savings of more than Rs. 15,000 crore to date, she said.

Single Nodal Agency (SNA)

Previously, it was challenging to ascertain the timeliness and amount of funds released to the implementing agencies under a CSS and to determine whether the funds were from the centre or the state. Under the SNA model, each state has to identify and designate a Single Nodal Agency (SNA) for every Centrally Sponsored Scheme (CSS).  

State governments are required to transfer the CSS funds received from the centre and their corresponding share within a stipulated period to the single nodal bank account opened in a scheduled commercial bank. Money in a single nodal bank account also earns interest. Interest accrued in SNA bank accounts has resulted in savings of approximately Rs 10,592 crore from 2021-22 to date.

Digital Budget

Over the years, our Budget documents are simplified in terms of language, focusing on basic English/Hindi, (therefrom translated to other regional languages) so readers across the country can understand our plans for the year. This has been done without compromising transparency, as all relevant data and documents are provided in annexures. This green initiative has reduced the number of printed copies and made the process of laying the budget in Parliament seamless.