'What gets measured gets managed,' noted Peter Drucker wisely, In the world of projects, infrastructure and government schemes, measurement and management is difficult. The challenge lies in effectively measuring outcomes to ensure resources are allocated efficiently and lead to meaningful impacts.

Arthashastra, Chankaya's 4th c. BCE treatise on statecraft and economic policy, prescribed results-linked rewards for state officials, ensuring efficiency and accountability. This was an early manifestation of today's outcome-based financing (OBF). Mahabharata mentions Yudhishthir's 'Rajasuya yajna', which allocated responsibilities and honours based on demonstrated contributions, mirroring modern principles of disbursement-linked indicators (DLI).

Even temple economies functioned on an outcome-driven model, where grants were contingent upon their societal impact, much like today's output-outcome monitoring framework (OOMF). The gurukul system also followed a performance-linked structure, where 'guru dakshina' of students was determined by the practical impact of their learning, a la today's programme-for-results (PforR) funding in education and skill development.

No doubt the terminology has evolved. But the fundamental concept remains the same: financial disbursements should be tied to measurable results. Today, multilateral donor agencies like World Bank, Asian Development Bank (ADB) and African Development Bank (AfDB) have embraced these principles, using OBF instruments to drive efficiency, accountability and sustainable impact across infrastructure and development projects.

OBF has been particularly successful in large-scale infra projects, where defined, tangible outcomes ensure that financing leads to real-world impact. Multilateral donor agencies increasingly rely on PforR, DLI and OOMF to ensure projects deliver on their promises.

Take World Bank's PforR initiative in Tanzania, where financing has been directly linked to improved road quality, maintenance efficiency and rural connectivity. Funds are disbursed only when specific milestones, like length of roads upgraded, safety enhancements and improved access for local communities are achieved. This has minimised project delays, reduced corruption and ensured long-term sustainability.

Egypt's AfDB-backed urban transport modernisation programme deployed DLI-based financing to enhance metro expansion and integrate intelligent transport systems. By tying financial releases to milestones like improved passenger capacity, less travel time and emission reductions, the programme has led to significant upgradations in urban mobility.

In Brazil, results-based financing in water supply and sanitation infra has been instrumental in expanding pipeline networks and wastewater treatment facilities. Rather than disbursing funds based on project inputs, financial flows were tied to measurable improvements in water quality, service accessibility and sustainability indicators. This model has ensured that investments translate into real benefits for communities, rather than just fulfilling construction targets.

In India, under the World Bank-supported PforR in AMRUT 2.0 (Atal Mission for Rejuvenation and Urban Transformation), funds were released to states based on achievements across indicators like universal water supply coverage, energy-efficient water systems and improved service-level benchmarks. The performance-based disbursement structure has encouraged states to prioritise outcomes over inputs, leading to faster implementation and enhanced citizen-centric results.

As governments face pressure to optimise resources and ensure value-for-money investments, integrating OBF into future transportation, energy, water and urban development projects is imperative. Applying this mechanism to social sector programmes requires a more nuanced and cautious approach. Unlike roads, bridges or power grids where results can be measured within a fixed timeline, social impact outcomes are often long-term, qualitative and influenced by multiple external factors.

In education, improvements in student learning, literacy rates or employability may take years, if not decades, to materialise. Similarly, in public health programmes, interventions aimed at reducing child malnutrition or improving maternal health require continuous, multi-year investments.

This poses a fundamental challenge for OBF mechanisms like PforR, which prioritise measurable, time-bound indicators. If not carefully designed, these models may promote short-termism, prioritising quick wins over long-term systemic change. An education programme tied to immediate improvements in test scores may lead to teaching-for-exam strategies, rather than fostering deep, conceptual learning.

National Education Policy (NEP) 2020 recognises such complexities, and emphasises outcome-oriented learning, foundational literacy and skill-based education. While not structured as an OBF programme, it lays the groundwork for performance-linked financing by promoting competency-based assessments and measurable learning outcomes. This alignment opens up opportunities to design future education programmes that balance long-term systemic reform with results-driven accountability.

To integrate OBF in the social sector, financing frameworks must be more flexible, incorporating qualitative assessments, longer evaluation horizons and mixed funding approaches that account for both immediate results and long-term impact.

Development institutions must also recognise that in healthcare, education and social protection, success is often incremental and dependent on behavioural and systemic shifts. As resources become increasingly linked to results, creating effective, inclusive and sustainable OBF models will be crucial for driving real change in communities.

Pachori is director, ministry of education, GoI, and Jha, is associate director, KPMG