Governance in India has long been marred by structural challenges such as transparency, lack of accountability, and sustainable and inclusive growth. Since independence, some of these challenges have proven to be major obstacles in the way of the nation's growth. Indeed, India's growth was hampered by challenges during the formative years after independence.
With the aim of achieving transformative transparency and accountability and further promoting good governance, the Government of India conceived a Public Financial Management System (PFMS).
PFMS began as a pilot project in 2010 with four main schemes to be implemented in some states. By 2013-2014, the PFMS already had a mandate for all DBT payments to all major government welfare programs. India.
Today, the mandate given to PFMS under the Cabinet decision is to provide:
A financial management platform for all plan schemes, a database for all recipient agencies, integration with the basic banking solution for banks that manage plan funds, integration with state treasuries, effective and efficient monitoring of cash flow funds at the lowest level implementation for plan scheme of government
Provide information through all implementation plans/agencies in the country on the use of funds, leading to a better monitoring, review, and decision support system to improve public accountability in the implementation of the plans.
Achieve efficiency and economy in the management of public finances through better cash management for government transparency in public spending and real-time information on the availability and use of resources through schemes.
PFMS has evolved as the end to end solution to processing, monitor, and settle central government financial flows. It has the unique ability to pre-validate account details before paying for transactions. The PFMS can be credited to the transformation of the direct beneficiary transfers space in financial governance in India. It is estimated that Rs 102 crore of DBT transactions by PFMS in FY 19-20 amounts to about Rs 2.67 lakh crore. Through efficient use of technology, PFMS is estimated that it has saved around INR 1 lakh crore in direct beneficiary transfers.
Today, PFMS has made governance more responsive, accountable and transparent. It has been developed as a distinct brand in the field of public finance management and as a core, IT platform for the usual activities of CGA, such as payments, receipts, accounting, control of expenditure control, provident fund management, pensions, etc.
The PFMS system is now visualized as an important decision tool to trace the flow of funds to the last recipient or level of implementation Effective management of floating funds in the system, Just in time transfers, and monitoring and control of funds not used.
The scope of work for PFMS in governance in India is limitless. To make the system even more robust, PFMS will have to relentlessly continue to aggregate all states, agencies, providers, etc. to your range.
In the future, the successful development of PFMS will depend on a few key factors such as:
Agility in terms of Onboarding/integration of all government accounts: While creating a PFMS tool is one thing, delivery on the vision of PFMS requires great agility in terms of Onboarding / integrating all major government`s Accounts. Only after great coverage, true execution of the concept really be implemented.
Effective data management capabilities: The PFMS, in the future, will need to add substantial data management capabilities to ensure better monitoring/review to deliver the idea of the decision support system for effective cash management or management of ideal float in the system.
Continuous improvement: Adapting to rapid technological changes is another key area that requires a great focus in terms of updating and monitoring.
Collaboration with the banking system: Finally, one of the most important factors for the successful implementation of the PFMS is its integration with the banking systems. Banks and PFMS will need to establish an effective partnership to ensure faster coverage/integration for all government entities.
Today, PFMS has merged with all major public sector banks, private sector banks, Cooperative banks, Regional Rural Banks, India Post, and RBI. The performance of these banks combined with PFMS is critical to achieving the government's goal of e-governance and digital and financial inclusion. The performance of banks is regularly monitored against a set of predefined Key Performance Indications such as waiting time for transaction lead time, data updation, account verification, Error counts, etc.
The PFMS has revolutionized the methods of managing public finances in the country. With constant improvement and increasing coverage, the scope of PFMS is constantly increasing. In the future, the PFMS will not only be seen as a tool for managing planned expenditure but will also add new meanings to Direct Beneficiary transfers, data-driven cash management, and e-governance in India.
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