Brief notes on the Reforms in financial sector management (India)

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Reforms in the financial management system are an integral part of the reforms in governance in general. Therefore, these reforms are critical in achieving the national development objectives.

The financial management system is quite wide and encompasses resource mobilization, prioritization of governmental efforts, resource allocation, formulation of detailed plans, setting up information systems that assist decision making, having meticulous accounting systems and creation of robust internal and external accountable mechanisms.

For a long time, financial management in developing countries was viewed as a process that central agencies like the Ministry/Department of Finance to keep “spending agencies under co through continuous review and specification of inputs and verification of documents, submitted payment.

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As an extension of this approach, financial management was viewed as being restricted budget implementation, administration of payment systems, accounting and reporting in the states funds received and spent. This approach with a long lineage continues to be prevalent even now, through a declining scale”.

Reforms in financial management have concentrated on taxation reforms, the use of govern budget as a vehicle for economic development, through improved budget classification system, accounting system reforms etc. Cost-benefit analysis techniques were also applied. From the 1970s, the containment of fiscal deficits through tightened fiscal management, pre-occupied the economists.

In the 1980s, the management approach came to be prevalent which included a corporate type of financial management within an overall framework of accountability. The overall assessment is that the system financial management in developing countries has generally been slow in adapting itself to changing requirements. Basically, there has been a segmented approach to reforms.

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