States’ subsidy accounting must be transparent: CAG

Source: The post is based on the article “States’ subsidy accounting must be transparent: CAG” published in The Hindu on 11th April 2023

What is the News?

The Comptroller & Auditor General (CAG) of India has addressed the Annual Accountant General’s Conclave.

What are the key highlights from his address?

Firstly, States must take measures to maintain proper accounting of subsidies, reduce fiscal deficits, remove revenue deficits and keep outstanding debts at an acceptable level.

Secondly, States should meet their capital expenditure, including loans and advances, from their own sources of revenue, or at least confine net debt to capital expenditure.

Thirdly, States must distinguish between justifiable subsidies from freebies, which are not fiscally responsible.

Fourthly, CAG has expressed concern over rising risks related to fiscal sustainability and financial indiscipline in many states due to off-budget borrowings, misclassification of revenue expenditure as capital expenditure and because State guarantees are not captured in finance accounting.