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Indian Variant of MTEF: The Scope and Opportunities to Develop an Effective Budget Planning Process

Publication date

Jan, 2017

Details

NIPFP Working paper No. 185

Authors

Pratap Ranjan Jena

Abstract

The paper examines the medium-term fiscal policy (MTFP) and a more conventional medium-term expenditure framework (MTEF) adopted in India under the provisions of the fiscal rules. The MTFP and the MTEF, professed to improve fiscal discipline in the context of fiscal rules, did not promote a multi-year budget planning process. The abolition of the five-year development planning process and the subsequent decision to remove plan and non-plan distinction from budget classification created a void with regard to the budget planning. This has necessitated developing a revamped fiscal architecture in the form of a medium-term framework to widen the short horizon of the annual budgeting exercise. The paper makes a case for developing structured medium-term budgeting framework (MTBF) building on the existing institutional framework both at the Central and at the subnational level and subsequently incorporating performance indicators in sector strategies. 

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