The public expenditure management is a challenge to the Government of India in the context of budget making during the post-liberalization period. Clarify it.

Public expenditure management (PEM) is the process of planning, allocating and controlling government spending to achieve fiscal discipline, allocative efficiency and value for money. In the post-liberalisation era, as the state moved from being a producer to a regulator and enabler, managing expenditure within tight fiscal limits has become a persistent challenge in budget-making.

Why it is a challenge

• Committed expenditure: interest payments, salaries, pensions and defence consume a large share of the budget, leaving little fiscal space.
• Subsidy burden: food, fertiliser and fuel subsidies are large, often poorly targeted, and politically difficult to rationalise.
• Revenue-capital imbalance: revenue expenditure crowds out growth-enhancing capital spending.
• Fiscal deficit and FRBM targets constrain flexibility, while off-budget borrowing masks the true fiscal position.

Reforms undertaken

• The FRBM Act, 2003 institutionalised fiscal discipline and transparency.
• Shift from outlays to outcomes through outcome budgeting.
• Direct Benefit Transfer and JAM trinity to plug leakages and better target subsidies.
• Merger of Plan and Non-Plan classification (2017) for cleaner budgeting.

Effective PEM now demands credible fiscal consolidation, protection of capital expenditure, rational subsidies and transparent accounting, so that limited resources deliver maximum developmental impact.