Reforming India’s Institutions of Public Expenditure Governance

The poor quality and effectiveness of much of government expenditure in India makes it important to analyze ways of improving effectiveness through institutional reform. Improvements in outcomes include better targeting of redistributive measures and more efficient spending on productive projects. Four potential areas of institutional reform are: (1) improved functioning of individual ministries and departments, at the central and state levels; (2) better coordination across individual ministries and between the center and states, through reform of the Planning Commission; (3) reassignment of expenditure responsibilities across levels of government (center to state and/or state to local); and (4) reassignment of tax authorities to provide improved incentives for expenditure governance through electoral accountability. The paper will discuss each of these four areas of potential institutional reforms, their likely impacts, and possibilities for implementing change. ∗ This is a revised version of a paper presented at a conference on India’s State Institutions, at the Rockefeller Center, Bellagio, Italy. I am grateful to Devesh Kapur, and T.V. Somanathan for helpful discussions on an earlier version, and conference participants for additional comments. They are absolved of responsibility for shortcomings in the paper. Reforming India’s Institutions of Public Expenditure Governance Nirvikar Singh Reforming India’s Institutions of Public Expenditure Governance Nirvikar Singh University of California, Santa Cruz Revised October 2013