Public Procurement Legislation Essential for Improving Public Financial Management in India
Takshashila Institution, Policy Brief, 2015-01
9 Pages Posted: 17 Apr 2015
Date Written: April 17, 2015
The new Indian government elected in May 2014 has commendably decided to seek suggestions to refine the Public Procurement Bill of 2012, which was introduced by the previous government. This signals the intention to secure the passage of the revised Bill during the remaining months of 2015. This Policy Brief focuses on three aspects relating to the Bill: its potential benefits, selected design features and implementation challenges.
The brief argues that potential benefits from well designed and implemented public procurement legislation include fiscal savings arising from annual procurement expenditure, generating much needed fiscal space, and fiscal flexibility to channel government expenditure into growth enhancing areas. One such area is increasing public investment with potential to crowd‑in private investment. The procurement legislation could also assist in a shift towards rule‑based institutional procurement process.
Estimation of potential fiscal savings from beKer procurement process is hampered with poor quality of data on total amount of procurement and its major components. This gap needs to be urgently addressed. A conservative but crude estimate of potential savings generated by the revised Bill ranges between 0.6 percent and 1.2 percent of GDP, depending on the extent of efficiency achieved. This compares well with the revenue deficit of 2.9 percent of GDP projected for 2014-15 by the Union budget.
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