Dec 20th, 2017 at 02:21PM

  • According to the financial audit report of the Comptroller and Auditor General (CAG) of Union Government, the fiscal deficit for FY17 was merely Rs 3,525 crore more than what Government has given in its Revised Estimates in the Union Budget for 2017-18. Hence, fiscal deficit as % of GDP in FY17 is 3.54% according to CAG compared to 3.52% estimated by the Government in Budget.
  • We did analyse the fiscal deficit numbers provided by CAG and Government for the last 15 years. Before 2005-06 the audited figures always remained within the budgeted figure. This trend reversed after 2005-06 and the differences between both numbers bulged significantly. The trend was correcting since 2011-12 but for 2015-16. For 2016-17, the CAG numbers and Budget (revised) numbers are not much different. This indicates that there has a significant improvement in fiscal architecture in addition to the fiscal consolidation that the Government has been doing.
  • In the earlier years (particularly in FY07-FY09), the divergence between CAG and Budget is due to the lack of transparency in disclosure of receipts and expenditures. For example, during any year expenditures that need to fall under Major Heads are classified under the Minor Head. Another aspect of opaqueness is high degree of aggregation. This aspect has been brought forth by the 12thFinance Commission which has specified eight set of separate statements along with the budget.
  • Also, Government’s practice of using cash flow based accounting to finalise the accounts makes the accounting process difficult because Government’s financial position at any given point and the changes that take place over time are not provided in the cash based system. Government’s liabilities such as accrued liabilities on interest payments due as also dues on account of pensions and superannuation benefits are not reflected. Current assets as well as non-financial assets are not tracked. Cash-based accounting leads to ambiguity, as tax revenues can be collected in excess during a period followed by high incidence of refunds. Payments can easily be deferred and passed on to future periods, revenues due in the future could be compromised by providing for one-time receipts etc.
  • As per the classification of various heads under Government accounting is concerned, the same has been notified by CGA under Government Accounting Rules (GAR) and has never been changed.

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