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Reflects the country’s policy objectives and abilities
Change is the only constant phenomenon in life! If you thought this is the most boring cliche you’ve ever heard, it just seems that our government perhaps has never even heard about it, what with their focus never fully understanding the dynamic changes that developing economies undergo. One reason why multi-year budgeting is perhaps the doctor’s order of the day for us!
Countries like Australia, Austria, New Zealand, the United States, Germany and Great Britain are all picking up the threads of multi-year budgeting, which is in vogue today. And why not, especially as it spells out the means to correct fiscal problems, to estimate fiscal upshots under alternative economic conditions, to provide for a stable and consistent budget and to involve different ministries during the process. A variant of this approach is the Medium Term Expenditure Framework. Multi-year Budgeting is also called Forward Budget, Expenditure Review, Forward Estimates and by other nomenclatures in different countries, and it also has plenty of methodologies, which could be prudent to developing countries like India. This newfound approach could be a worthy fiscal policy and management tool, and could reflect the country’s policy objectives and administrative abilities as it also involves the line ministries in the budget process.
Although the usage of Multi-year Budgeting is on the rise, one can still not gloss over the fineprints of its shortcomings. For instance, the inclination towards over-estimation of economic growth and resources available during the forecast period and also probability of spending agencies to view the forecasted expenditure as an entitlement are aspects which governments have to bear in mind while going about implementing this technique. But in spite of these, Multi-year Budgeting is surely a great way to get an economy into a proper perspective.
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