21st century India needs a real-time fiscal data portal

Source: The post is based on the article “21st century India needs a real-time fiscal data portal” published in the Livemint on 31st January 2023.

Syllabus: GS 3 – Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

Relevance: About real-time fiscal data portal.

News: Former chief economic adviser in his book mentions accounting tricks that made it difficult to gauge the precise extent of the fiscal deficit. Hence, the government should make efforts for a more transparent and accessible budget for India’s citizens and investors.

Why does India need a real-time fiscal data portal?

At the moment, fiscal data in India is fragmented, incomplete, and often comes with lags. This makes it difficult to analyse government finances across the country comprehensively.

If local body grants provided by the Union government to states are shown as entries in the budgets of both the Union and states, it will overstate government spending.

Most states do not maintain reliable and up-to-date data on off-balance sheet spending and contingent liabilities (including liabilities on account of state level public enterprises).

Different states tend to have different budgetary classifications, making inter-state comparisons difficult.

What are the committee recommendations that demand a real-time fiscal data portal?

-A 2018 committee on fiscal statistics appointed by the National Statistical Commission (NSC) argued for a complete overhaul of India’s fiscal database.

The committee found that a) local government accounts were simply unavailable for most states, b) India’s fiscal data lacks compilation, classification into suitable categories and eventual publication on a website or in printed form.

The report mentions that as many parts of the financial system have been digitized, it is possible to build a comprehensive real-time fiscal data warehouse.

-Over the years, a number of Finance Commission reports have advocated the setting up of an apex fiscal council to aggregate fiscal data. Such a council can help clean up public finance statistics and provide a more accurate view of the flow of public funds across the country.

What are the advantages of a real-time fiscal data portal?

The portal will a) inform about the funds flowing across the three tiers of government—Centre, state and local governments, b) be an invaluable resource to understand the Indian economy, c) allow India’s citizens to monitor fund flows minutely, d) improve the quality of reporting, thereby driving up the efficiency of public spending, e) allow government vendors and related businesses to plan their purchases and inventories better, f) help government to estimate borrowing needs of different levels of government accurately.

Hence, the government should create a federal fiscal organization to bring more consistent reporting standards and a real-time fiscal data portal that can bring about economy-wide efficiency gains, and pre-empt fiscal crises in the future.