By Kaushiki Sanyal, Senior Analyst, Bharti Institute of Public Policy and Sruti Bandopadhyay, Independent Researcher based in Washington D.C.

This article was first published in the Mint on November 20, 2013

At a time when India is going through an economic slow down, it seems counter-intuitive to enact legislation such as the National Food Security Law or continue to dole out subsidies that end up benefiting rich farmers. One reason for these economically questionable actions is the political dividend that parties hope to reap. However, there may be other reasons at work—the lack of understanding among parliamentarians of far-reaching economic impact of government policies. This has grave consequences for a parliamentary democracy where financial oversight is one of the key functions of a legislator. It may also explain to some extent the relative lack of debate on fiscal matters in Parliament.

Data released by PRS Legislative Research since 2000 shows that Lok Sabha has not spent more than 45% of its time discussing the budget. In 2013, Parliament did not discuss the budgetary proposals of any ministry (demand for grants). All were “guillotined” i.e., put to vote without any discussion. In case of Bills, the debate hardly ever goes into their fiscal implications. Financial memoranda of Bills only provide the estimated expenditure at the Union level. For example, the Right to Education Bill, 2008, which required the government to reimburse unaided schools for expenditure on every child, did not provide any estimate for this purpose. The Food Safety and Standards Bill, 2005, only budgeted for setting up the Food Safety and Standards Authority of India. It did not specify whether the cost of implementing this law would be different from the existing system, nor did it account for the enforcement costs to be borne by state governments.

What is holding back members of Parliament (MP) from questioning the executive on fiscal matters? The problem may be lack of expertise among MPs and lack of access to objective and high-quality research that is independent of the executive. Unfortunately, MPs in India do not have a staff of high quality researchers (unlike in other developed democracies) to help them gain expertise in budgetary matters. The institutional research support within Parliament such as a library and reference service is limited due to resource constraints, nor are their research products available readily in the public domain.

A remedy for this may be the establishment of a parliamentary budget office (PBO) in India—a common feature across many countries ranging from developed democracies such as the US, the UK, Canada, Australia, Korea, to Hungary, Uganda, Kenya, Thailand and Bangladesh. PBOs provide legislators with high-quality analysis that is independent of the executive. They specialize in objective and policy neutral analysis on the full budget cycle, the broad fiscal challenges facing the government, budgetary trade-offs and the financial implications of legislative proposals. Such research can raise the quality of debate and scrutiny in Parliament as well as enhance fiscal discipline. Most importantly, it strengthens the role of Parliament in financial oversight.

The key challenges faced by any country that establishes a PBO are threefold—guaranteeing independence and viability of the office in the long-run; ability to carry out truly independent analysis; and demonstrating impact. Countries have adopted different models to suit their specific needs.

The degree of independence of the PBOs varies across countries—in the US, Korea, Uganda, Kenya, Canada and Australia, PBOs fall within the jurisdiction of the parliament, while in Sweden and the UK, it is under the executive. India will need to ensure the independence and non-partisanship of such a body for it to have credibility with legislators. This may best be done if it is established as a statutory body reporting directly to Parliament. A clear set of deliverables may be desirable.

The functions of the PBOs may differ too. For example, the US Congressional Budget Office (CBO) provides information on economic outlook, cost estimates of specific legislative proposals, long-term budget outlook etc. The Canadian PBO provides independent budget projections, fiscal sustainability report, and financial analysis of Bills. In Uganda and Kenya, PBOs exclusively cater to requests from committees while Canada carries out service requests from individual MPs but ranks them below committee requests in terms of importance. The US services requests from committees as well as individual legislators. The UK also caters to individual MPs. It may be worth it in terms of strengthening the legislature if the Indian Parliament were to invest in a well-funded, professionally-run PBO that would cater to both individual MPs and committees.

Has there been any discernable improvement in fiscal oversight in countries which have established PBOs? This is a difficult question to answer given the complexity of policy-making. However, there are some encouraging results. The Canadian PBO contested the true cost of the war in Afghanistan and most famously, exposed the real cost of the government’s proposed F-35 fighter jet procurement. In the US, the CBO focuses on costing or scoring legislative proposals relative to the baseline. This has helped discourage Congress from making unaffordable proposals. In Australia, the PBO does a costing of different political parties’ electoral manifestos, which can discourage unaffordable election commitments.

India will surely benefit from an institutional mechanism that strengthens the capacity of the legislature to hold the executive responsible in financial matters.

It is important to understand that a PBO can only provide independent research; it certainly cannot prevent executives from taking bad fiscal decisions.