India is among the fasted growing economies in the world today, and it’s estimated that the economics of India is the seventh largest economies in the world. India has a young population that that is growing; therefore, companies and foreign investors are investing their resources in India leading to the growth of the economy. The economy of India has been growing consistently for the last couple of years. For the economy to grow well, certain sectors of the economy need to be performing well because they are the drivers of the economy. Developing countries including India getting a lot of funding from the World Bank and grants and loans from developed countries to invest in essential infrastructure that is necessary for the growth of the country.
Critical aspects of the Busan Partnership on aid effectiveness that relate to improved government financial governance
Busan partnership was formed to help developing countries with financial aid that would assist in making them become developed like other developed countries (Siddiqui, and Ahmed, 2017). The Busan Partnership agreement made the nations to agree to enhance the development and effectiveness of the cooperation of the countries in mobilizing resources that the developed countries would use to develop their economies. The countries that formed the partnership focused on developing countries because they wanted to develop the developing countries first through transparency and responsibility. Among the key aspects of the partnership is to enhance cooperation among different states. The cooperation makes the work of countries to have resources that they can use to develop through a contribution by all the member states. The contributions are used for development.
SDG from 16.4 to 16.8
India has come with a vision and a strategic plan to develop the country by the year 2030 to have the country become a middle-income country. Developing countries face various challenges such as corruption and bribery that make the development of the country difficult (Siddiqui, and Ahmed, 2017). The Busan partnership required countries to be accountable for the resources that different stakeholders give them because it was discovered that India faces the challenge of corruption. The country is required to be accountable in resources that they are given to do development with.
The other challenge notable with India is lack of inclusivity where people are not allowed to participate in coming up with ideas that can help solve the problems that they go through (Siddiqui, and Ahmed, 2017). All people need to be strengthened to participate in the governance and formulate policies that help in dealing with the challenges that affected them. India is required to provide full disclosure of all the activities that the country is doing for the people — strengthening institutions such as the ones fighting corruption.
The Indian government uses various financial reforms when it comes to dealing with financial governance. The Busan partnership required all the developing countries that required to be supported financially to do various projects have come up with strategies of ensuring the resources are used for the right purpose. Developing countries face the challenge of misuse of funds; money is lost for purposes that it was not meant for.
The proposed reforms would lead to the formation of a committee to deal with matters related to finances as well as advising the government the best practices (Tang, Tiwari, and Shahbaz, 2016). The committee is also supposed to ensure that there is no corruption and the people to implement the government projects don’t steal the money through corrupt ways. The stakeholder that audit government activities also need to be involved while the government is implementing the various project to serve the people.
How Development Partners Can Identify System Weaknesses (Diagnostics) and Identify Two Areas of PFM (Public Finance Management） Reform Them
Development partners can identify weaknesses by analyzing the financial records of a country. In this case, the financial charts show that India has fiscal deficits. In the first three months of 2018, for example, the current account for the Indian government had a deficit of 16.9 billion dollars which is also estimated to be 2.5 percent of the GDP (Tradingeconomics.com, 2019). This was an increase because in the previous year the deficit was 13.7 billion dollars. By looking at such figures, it will be apparent to development partners that there is a weakness in the financial systems of the government.
Additionally, the development partners can diagnose the weakness through an audit to identify the challenges affecting the system. The developing countries that require to be supported by different Busen stakeholders have to ask for support on projects that the government want to do for the people. The funding is meant to solve a particular problem affecting the people (Asher, and Novosad, 2017 245). Once the problem has been identified budgeting is done to estimate the cost of the project. The state department gave the responsibility to cost the expenses that will be incurred in completing the project. Corruption affects government projects in developing countries; hence measures need to be done. The Busen agreement does not tolerate corruption; hence preventive measures need to be implemented to deal with the challenge.
PEFA provides different dimensions that need to be considered when a budget is being developed, and the aspects include the predictability of the finances that will be required to run the projects by the government (Sinha, Pearson, Kadekodi, and Gregory, 2017). Budgets are based on estimation; therefore, the estimation needs to be accurate. Also, scrutiny needs to be done after the budget estimation has been done to ensure that the funds were not used for unbudgeted purposes. All the activities of the implementation of the project should be transparent.
Accountability is crucial for any government; not only should developing countries be accountable to the people on how they earn taxes from. India has a weakness in letting the public know the activities that they are engaging in and how they are using the resources allocated to do various projects (Mbiti, 2016). Transparency improves the trust that the people have towards their governments. Transparency is also an indication that the leaders are using the resources for the correct purpose. The public also has ideas of how they think the projects can be implemented to solve the challenges that they go through.
Some challenges come with budgeting and accounting if experts do not do the budgeting. India has tried to solve this challenge by engaging experts in the budgeting process and the implementation of the project (Awwad, El Souki, and Jabbour, 2016). Engaging experts help in dealing with the foreseen problems that ordinary people cannot. The success of India will depend on how effective they use their resources. If resources are mismanaged and stolen by those in authority, then the country is not successful.
Government’s Perspective How Proposed Reforms Would Change the Financial Governance of the Country and the Actors Who Would Be Impacted
In recent past India has transformed to an emerging donor as part of its South-South strategy whereby the objective is to use the foreign aid to implement its economic, political and social programs (Price, 2004). Financial and budgeting reforms are very significant for such a country, and different stakeholders feel the impacts.
One of the financial reform is moving to the accrual accounting which helps in improving transparency in the use of government resources (Chan, 2006). Through the annual financial statements, the government can account for all the revenue as well as the expenditure. Movement from the cash to the accrual accounting makes the government gain the trust of both the citizens as well as the development partners.
When the financial reforms are made it means that the accountants and financial managers who might have benefited from the ineffective system will be at a loss. When there is credibility through accrual accounting rather than cash, it means that the revenue is thoroughly accounted for and the funds can be directed toward the development of the country (Chan, 2006). The transparency impacts all the stakeholders in one way or the other because when the resources are used appropriately, it means that the employees will get their salaries and remunerations without delay and that the employees are viewed as people with good moral standing.
Through accounting reforms, the government can manage finances and develop the infrastructure (Chan, 2006). Also, the reforms enable the country to detect any financial misconduct and deal with them before they are as they adversely affect the country. This affects economic development because when investors learn that the financial systems of a country are transparent, they will be motivated to invest in the country. The reforms, therefore, affect different stakeholders such as the investors, employees as well as the citizens.
The budgetary reforms, on the other hand, are beneficial to the citizens as they receive development projects which could not have been carried out if public funds are misappropriated (Chan, 2006). Budget reforms help in ensuring that resources are evenly distributed among all the regions and no region remains marginalized. This together with the financial transparency ensures that funds are not misappropriated and that any misconduct is detected, reported and the culprits punished. The reforms are however costly, so there is a dilemma of reforming or dealing with other urgent issues such as hunger, especially for a developing country.
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