Best practices compendium on outcome budgeting

This resource from the Development Monitoring and Evaluation Office, Government of India, is designed to assist government entities in shifting from input and output-focused budgeting to an outcomes-oriented approach.

This means that, under outcome-based budgeting, decisions are informed by the impact and effectiveness of interventions. For example, instead of allocating funds to specific programmes or activities, a government would allocate funds toward achieving specific outcomes (p.8, p.13). The document defines an outcome as “short to medium-term effects that serve as a precondition to accomplishing long-term goals or objectives. These outcomes represent meaningful changes for beneficiaries, such as improvements in knowledge, skills, attitudes, behaviour, and practices” (p.13).

This approach is valuable because it encourages planning, management, and accountability that extends beyond mere cost-efficiency (cost per unit of output) and moves towards cost-effectiveness (cost per unit of outcome). However, the approach has limitations. Not all desirable outcomes can be easily quantified, and the most measurable outcomes might not always be the most appropriate, which could lead to distortionary behaviour or gaming. Despite these limitations, the recommendation to identify, define, plan for, budget for, and monitor specific short- or medium-term outcomes, which are seen as crucial steps towards achieving more substantial, long-term outcomes, is fundamentally sound.

However, the document does not address the potential unintended consequences of outcome monitoring or how best to integrate this approach into a broader evaluation framework, two important considerations that should be addressed if implementing this approach.