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April 23, 2010

Gender Budgeting and Equity Issues in Fiscal Federalism Arrangements: Some Lessons from India

Posted by Davina F. Jacobs 

Despite the growing recognition of gender factors in budget planning and execution, there have been relatively few attempts to translate them to the intergovernmental sphere. An interesting working paper by Lekha Chakraborty (attached below), drawing on her own analysis and that of an earlier study of the Indian National Institute of Public Finance and Policy (NIPFP), discusses this up to now often neglected area. The question discussed is basically can gender issues be incorporated into financial devolution approaches. She discusses these issues in the context of the policy agenda of the Thirteenth (and latest constituted) Finance Commission of India.

India has and continues to be a pioneer in institutionalizing gender budgeting within its Ministry of Finance. The process of gender budgeting in India gathered momentum with a NIPFP study in 2003. To provide the analytical framework for gender budgeting, this study constructed an econometric model to link spending on public education and health to the Gender Development Index (GDI), showing the positive effect of such spending on this indicator of gender inequality—see the development of the GDI as set out in Box 1, page 8, of Chakraborty’s paper. This approach did not refute the widely explored link between economic growth and (gender-sensitive) human development; rather it confirms this link through higher public expenditure, particularly through healthcare and education.

As the starting point of the paper, the author emphasizes the bleak reality of demographics in India—the continuous decline in the female/male ratio of young children, especially in some of the more prosperous states of India—and advocates that the Finance Commission transfers be used to address this issue. A simple method for accomplishing this could be to introduce some weight in favor of the female population of the states in the Commission’s fiscal devolution formula. According to Chakraborty, the message would be even stronger and more appropriate if the population share of young females only—that is the number of girls in the 0–6 age cohort—is adopted as the basis for determining the states’ relative shares of the national expenditure amounts to be disbursed for related services. While social mores cannot be changed by fiscal fiats, a proactive approach by a high constitutional body like the Finance Commission would be desirable. The intergovernmental transfer system can and should play a role in upholding the right to life for India’s young females.

The author then continues to argue that it is not plausible to incorporate more gender variables in the Finance Commission’s already complex transfer formula. In other words, inclusion of a “gender inequality index” (or GDI as mentioned above) in the formula may not result in the intended outcome, as the variables included in the index may cancel one another out. Accepting the fact that incorporating gender criteria in fiscal devolution could only be the second-best principle for engendering fiscal policy, the paper argues that any newfound policy space could be used a special dispensation transfer arrangement for girls and could then lead to public expenditure decisions that correspond more closely to the revealed preferences (or the “voice”) of women. Gender responsive budgeting at the local level will also benefit from recent 73rd (attached below) and 74th constitutional amendments to the Constitution which provide for Panchyat Rajs as the third level of administration in villages, and also more representation by women in these decision-making bodies.

The section in the Chakraborty paper dealing with recent key budget management initiatives required to ensure gender-sensitive public policy making in India (page 7 onwards), could be considered as the most relevant reading for a PFM audience. The solutions suggested are mainly twofold:

· Firstly, transparency in the allocation for women through adequate changes in budgetary classification to protect these provisions from re-appropriation to other categories of spending.

· Secondly, regarding fiscal decentralization, gender-sensitive budgeting at the subnational government levels should be strengthened, as provisioning of beneficial public goods (e.g., education and health services) are primarily the responsibility of subnational governments.

As intergovernmental and public financial management systems are constantly been refined in many countries, policy makers concerned with gender equality could take note of India’s experiences as described in this paper.

Earlier postings by the same blogger on Gender Budgeting issues can be found here and here.

Download Working Paper

Download 73rd Amendment

Note: The posts on the IMF PFM Blog should not be reported as representing the views of the IMF. The views expressed are those of the authors and do not necessarily represent those of the IMF or IMF policy.

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