How Effective Utilisation of Public Funds is Crucial to Meet Development Goals? Explain Reasons of Mis-Utilization

Updated November 10, 2022

To achieve the development goals of a country, the effective utilisation of public funds/allocation is very crucial. Education and health are the key sectors of any society. The infrastructure of any society depends upon the development of these key sectors.

Public funds are primary to make any development under these sectors but under parliament law, these funds are appropriated. Apart from education and health sectors, water and sanitation sectors are also crucial for the satisfactory social infrastructure in a country.

Development in water and sanitation sectors leads to social and economic development which directly depends upon public appropriation of funds. So, the primary duty of any government is to assure the efficient use and allocation of public funds. If these points are not taken into consideration, it will lead to a substandard social infrastructure in a country.

Reasons of Under-application & Mis-application

Poor Resource Planning

It is due to the fact that public appropriation of funds is a complex, multi-branched process, which is not naturally transparent to the common public.

The weak performance of Public institutions

There is no direct pressure of competition within public bodies to achieve any goal. It means there is no risk of elimination which generally makes them inefficient.

The major cause for the arising of such problems is our political systems because they are ineffective at mobilizing public pressure for specific institutional reforms in public enterprises.

For example, Rajiv Gandhi, the 6th prime minister of India, had stated once that when the government allocates Rs. 1 for the public, only 15 paise reaches to them due to inefficiency of public bodies.

Weak finance management

The major reasons for under-utilization and mis-utilisation of the public funds are weakness in finance management and prevalent leakage in expenditure.

Under-utilization by the states

The implementation of schemes is quite complex. There are institutional and procedural hurdles in the process of implementation of schemes and deficiencies in the planning process being followed by the state governments.

For example, a fund was allocated for National Mission for Clean Ganga but it remains unutilized according to CAG’s reports. Such problems arise due to the deficiencies in the planning process.

Hurdle in Budgetary process

Delay in the flow of funds and in releasing sanction-orders, decision-making in the states, an insufficient delegation of financial powers to the district/sub-district level authorities, and uniform norms of centrally sponsored schemes for all states are like a hurdle in a budgetary process that leads to under-utilization of public resources. For example, Delay in the payment of workers under MANREGA.

Weakness in System

Lack of trained and regular staff for various significant tasks like management, finance/accounts, and frontline service provision has played a significant role in weakening the capacities of government apparatus in the states for implementation of plan schemes.

The implication of Inappropriate Utilisation of Public Funds is listed Below.  

(i). Delayed implementation of various planned schemes and projects.

(ii). Compromises with the quality of work done and the service provided to the public.

(iii). Corruption on the part of the authorities concerned.

(iv). In the long run, it takes the shape of an unjust and improper development scenario in which all the communities do not receive the benefits of development.

(v). Erosion in the legitimacy as well as the capacity of the state to provide essential services to the citizen.

The Way forward

To develop satisfactory social infrastructure and to provide social and economic justice to the people of the country, effective utilisation of public funds plays a crucial part.

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