What is Outcome Budgeting?

One of the leading budgeting technique followed in India at present is the outcome budgeting or outcome based budgeting. It is practiced by most of the Ministries while preparing their budget details and submitting it to the Ministry of Finance for the preparation of the annual budget towards the end of February.

Outcome based budgeting is a practice of suggesting and listing of estimated outcomes of each programmes or schemes designed.

Outcomes are the end products and results of various Government initiatives and interventions, including those involving partnership with the State Governments, Public Sector Undertakings, autonomous bodies and the community.

An interesting feature of outcome based budgeting is that the outcomes of programmes are measured not just in terms of Rupees but also in terms of physical units like Kilowatt of energy produced or tonnes of steel produced. Also outcomes are expressed in terms of qualitative targets and achievements to make the technique more comprehensive.

Procedure of outcome based budgeting  

Under outcome budgeting, each Ministry presents a preliminary Outcome Budget to the Finance Ministry, which is responsible for compiling them. The Outcome Budget becomes a progress card on what various Ministries and Departments have done with the outlays in the previous annual budget. It measures the development outcomes of all government programmes and whether the money has been spent for the purpose it was sanctioned including the outcome of the fund usage. Outcome budget is a performance measurement tool that helps in: 

  • Better service delivery
  • Decision-making 
  • Evaluating programme performance and results 
  • Communicating programme goals
  • Improving programme effectiveness
  • Make budgets cost effective 
  • Fix accountability 
  • Aid better scheme management

Outcome budgeting makes government programmes more result oriented, instead of outlay oriented. Under outcome budgeting, the document shows physical dimensions of the financial budget indicating the actual physical performance in the previous year, current year and targeted performance during the projected (next) year.

From 2007-08 onwards, the previous Performance Budget was merged with Outcome Budget. There was only one document i.e. the Outcome Budget. All Ministries have to prepare outcome budgets to make the budgeting target oriented.

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