The Outcome Budget: India’s Silent Revolution in Government Performance Management

Countries across the world are at crossroads in terms of increasing their coverage and quality of public services under tightening fiscal environments. India is no exception. Over the last few years, the country has undergone a silent but remarkable transition in performance management systems to achieve its national development goals with limited resources.

An articulation of this is the annual output outcome monitoring framework (OOMF) — a tool for enabling greater accountability and transparency in public expenditure as well as for maximising value for money.

Introduced in 2017, OOMF is an effort to link a public initiative’s budgetary allocations with its results. It is appended as part of the Union Budget. What makes OOMF a smarter framework is its departure from the traditional approach of defining results. While the latter looked at results from the lens of goods and services produced or money spent (inputs or outputs), OOMF defines it as the impact of public expenditure on the community or ‘outcomes’.

This seemingly small transition of outcome-first has triggered a systemic change in the way public schemes are conceptualised, designed, and implemented in the country. But the institutionalisation of OOMF hints at a much more significant transition in the mindset of how decision-makers now use evidence for management.

India’s journey to OOMF has unfolded across decades of experimentation and reforms in public sector management. These can be broadly categorised into three phases — accountability, efficiency and reformist. The phase of accountability, spanning nearly five decades, saw its origin in programme monitoring and evaluation under the first five-year plans. Public programmes operated with smaller budgets and the focus was to measure the quantity of outputs that reached beneficiaries while keeping leakages in check. The assessment of the public distribution system and its reform is a classic example of the accountability period.

The phase of efficiency saw its inception in the 1991 economic reforms, which ushered approaches such as the new public management practices, medium-term budget frameworks, budget transparency, and increased focus on results. As India entered a period of high economic growth and productivity, the focus shifted to maximising efficiency of service delivery and value-add for each rupee spent. In the mid-2000s, the country launched its first performance or outcome budget, which moved beyond outputs and held public schemes accountable to outcome achievement.

The Second Administrative Reforms Commission report of 2009 further recommended use of monitoring, evaluation and audits for optimising efficiency and outcome realisation. This phase, riding on a wave of digital reforms, saw an increase in management information systems (MIS) and the launch of the public financial management system (PFMS).

Citizen engagement and sensitisation are done through a dialogue on outcomes — not only about the expenditure that has been incurred but whether quality of life has improved. This institutionalisation of outcome thinking further complements the goal of ‘minimum government, maximum governance’ by rationalising and redirecting resources to solutions that work.

OOMF plays a pivotal role in this new reform-centric performance management system. In2021-22, OOMF covered 67 central ministries involving more than 600 central sector schemes and centrally sponsored schemes. This accounted for roughly Rs 12 lakh crore or a little more than one-third of the government’s total schematic expenditure intended at improving quality of life for almost a billion beneficiaries.

Importantly, the schemes serve as an essential safety net for people falling below the poverty line, estimated to be one-fourth of India’s population and support priority sectors. Using OOMF, ministries and departments continuously engage in a process of visualising the changes that they expect to achieve. These changes, framed as targets, are measured, and reviewed annually at high-level forums. Schemes failing to achieve outcomes are subjected to further review through systematic evaluations with the intent of improving or redesigning the scheme.

OOMF has taken institutionalisation of outcomes in the government system a step further and provided a strong foundation for future efforts such as strengthening scheme divisions within ministries and departments to capture outcomes at a regular frequency, going beyond periodic national surveys. The need of the hour is to further decentralise the practice of outcome-oriented thinking and decision making as a core part of governance, administration, and programme planning to all levels of government.

A consultative strategy for states to adopt OOMF can be framed along with the necessary capacity building interventions, tailored to the requirements of specific states. Finally, the OOMF can further evolve into a predictive tool which supports financial decisions based on past performance and outcome achievement.

Disclaimer: Views expressed are personal.

Urvashi Prasad, Director, Development Monitoring & Evaluation Office, NITI Aayog. Vijay Avinandan, Monitoring & Evaluation Officer, World Food Programme.