ABSTRACT
The importance of the preparation of estimates for the satisfactory management of public finance cannot be exaggerated. In the initial stages the estimates are in a very plastic condition, and can be drawn up with a view to give effect to a policy or carry out a programme. Their preparation is not merely a matter of arithmetical calculation. It requires the combination of ripe experience, technical knowledge, sagacity, and sound judgment. It is not simply a compilation of the figures furnished by the different Government officials. The tendency inherent in all Government departments to take the status quo as the norm to which the official activities should conform and work up to, is particularly strong in the financial administration on account of the inconvenience of introducing a new element in the transaction of a highly complex business. But the mechanical repetition of the figures of the past years cannot serve any useful purpose. In order to guard against this besetting weakness of all official systems, the British Treasury issues annually a stereotyped admonition to all officers connected with the preparation of the estimates warning them against assuming the last year’s estimates as the starting-point for those of the next. In the Civil Account Code, which is, as is well known, the Book of Wisdom for all officers connected with the administration of Indian finance, there is a standing instruction to the effect that the undue amount of reliance should not be placed on the figures of the past years. There is nothing easier than to take the last year’s estimates for granted, adding something to every item for which additional expenditure can be foreseen, but it is wrong in principle to follow this method in the preparation of the estimates. The estimates of expenditure, if they are to be of any value, should be based on the anticipations of the coming year and not on the facts of the current one. The forecast of expenditure is, however, only a half of the estimates; the other, and a more important one, is the forecast of the public revenues. A correct estimate of income from the various sources of revenue can only be possible if it is based on the first-hand knowledge of the economic conditions, and an intelligent interpretation of the factors affecting the trade and industry of the nation. The State income being mainly derived from the social income, the magnitude of the latter, and its fluctuations, due to the working of the economic system or that of the world factors, are a matter of a very great importance, from the standpoint of the financier, who is trying to look ahead and know the secrets of the future. The art of preparing estimates, requiring technical skill and understanding of the nation’s ability to pay, requires that the estimating officers should remain in contact with the movements of economic life, which, on account of its ever-growing complexity, are becoming more varied and frequent, and know their effect on the public revenues. The estimates are the cornerstone of every financial system, and the extent to which the anticipations correspond to the actual events, is the measure of the competence of the finance officers, and the efficiency of the system as a whole.
