Effective utilization of public funds is crucial to meet development goals. Critically examine the reasons for under-utilization and mis-utilization of public funds and their implications. (UPSC IAS Mains 2019 General Studies Paper – 4)
Effective utilization of funds for welfare services is one of the key tenets to ensure social and economic justice and meet developmental goals. However, as former Prime Minister Rajeev Gandhi had remarked, “only 15 paise for every 1 rupee spent on public welfare actually reaches to the masses”, thereby highlighting the gravity of ineffective utilization of funds in our country. Public servants are the trustees of the hard earned public funds, therefore it becomes their moral and legal responsibility for their effective utilization. The various reasons due to which these funds are under-utilized and mis-utilized are given below:
Under-Utilization
- High administrative cost and procedural delays in government offices which keeps the funds tied in administrative tangles and bureaucratic loopholes.
- Inappropriate budgetary allocation, for example: use of guillotine voting
- Lack of sufficient staff in government offices
- Improper technological penetration at grassroot level
- Ineffective decentralization of financial power
Mis-Utilization
- Corruption leading to diversion of funds to unauthorised sources.
- Poor accountability mechanism preventing their effective monitoring and utilization.
- Lack of coherence in planning.
- Ineffective decentralization of power
- Populist politics in the country.
- Corporate impact on policy makers i.e crony capitalism
- Favouritism and misuse of office i.e favouring someone over others while allocation of government projects.
- Expenditure rush during the month of March, popularly known as ‘March Rush’, which leads to unplanned and improper fund expenditure, to prevent lapsing of funds that have remained unutilized.
- Diversion of funds to other purposes.
Implications
- Social: Violation of the rights and entitlements of the masses. It leads to social problems like inequality, illiteracy, poor health and sanitation, increased animosity among different communities etc.
- Political: Misallocation and underutilization has led to unequal development in the country, increased corruption and inequality within different states. This has created the problems of regionalism, naxalism, and separatism.
- Economic: India’s continuous struggle with poverty and inability to build on its demographic dividend has been the major impact. Inspite of having a potential of double digit growth, our growth story still revolves around 7%, along with inadequate improvement in infrastructure, human indices, employment etc.
- Ethical: Breach of ‘Doctrine of Public Trust’ which lays responsibility on public servant for judicious use for the benefits of the masses.
No matter how good the policy we frame, its impact drastically depends on the allocation and effective utilization of funds. Therefore, to realize the ethical and moral duty incorporated in Directive Principles of States Policy to maximize welfare measures and prevent concentration of wealth in few hands, it is important to take appropriate policy measures to realize the goals of national development.
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