The public expenditure management is a challenge to the Government of India in the context of budget making during the post liberalisation period. Clarify it.

The public expenditure management (PEM) is an instrument of state policy whose objective is to have overall fiscal discipline, allocative efficiency, operational efficiency and macro-economic stability.

Challenges faced by government in public expenditure management while formulating the budget:

1. Autonomous component of expenditure: Compulsory expenses such as interest payments for public debt, expenditure on defence, pensions and wages and salaries of government employees.

2. Economic shocks: Global slowdown, taper tantrum policy of US Fed, Trade wars, Oil prices, Pandemic induced slowdown (Covid’19), etc. have an impact on the domestic economy because of globalisation.

3. Populist schemes: Farm loan waiver, MSPs for different crops, low-income tax rate slabs, results in higher fiscal deficit and government borrowings.

4. Low tax base: More reliance on regressive indirect tax acts as a constraint for the government to increase its social spending.

5. Inflation targeting: Restricts government spending.

6. Low revenue generation: Inefficient and technologically outdated public enterprises do not generate much revenue for the government to make space for expenditure. 

7. Ailing Banking sector: NPA crisis, issues of bank consolidation, compliance of Basel norms left banks with low-risk appetite to back up government expenditure.

8. Subsidy burden: Major portion of revenue goes to fertilizer subsidy and MGNREGA funds.

However, Government did take some measures to manage public expenditure:

1. FRBM (Amendment) Act: To reduce the fiscal deficit.

2. Adopting the revenue-capital classification: For allocation of more resources in creation of capital assets.

3. Inflation targeting by the Monetary Policy Committee: For price stability.

4. More tax devolution to states: Financial autonomy.

Bimal Jalan Committee on expenditure management has also recommended steps such as rationalising subsidies, sticking to a fiscal path, and strategic divestment. It's high to take these into consideration to unlock the growth potential of the Indian economy.