10.8.1 Fiscal policy has a crucial bearing on macro-economic management within the frame of national economic policy and towards the attainment of the objectives of economic growth, equity and financial stability. Fiscal data serve to gauge the impact of fiscal policy on the Real, Financial and External Sectors of the economy. The magnitude and quality of data produced and disseminated are conditioned by the Constitutional requirements and institutional arrangements. In this Report, the discussion will focus on the status of Fiscal Statistics of the Central Government and State Governments and the issues involved in data collection and dissemination, which is based on the Report of the Committee on Fiscal Statistics appointed by National Statistical Commission.
10.8.2 In India, the sources of fiscal data generally are the Government budget documents. The Government referred to is the general Government, which comprises Central Government, State Governments, and Governments of Union Territories.
10.8.3 The Government fiscal management is governed by the system of Legislative Financial Control enshrined in the Constitution of India (Articles 112-117, 264-293). This involves an elaborate process of presentation, scrutiny and passing of an Annual Budget and specific Parliament or Legislative approval for Government’s taxation and expenditure proposals. Fiscal accounts are maintained on an elaborate 6-tier system of function-cum-programme basis of classification. The top layers of accounting classification are the Major and Minor Heads. Below the level of Minor Heads, there are three more layers of accounting classification. The last level (6th level) is the ‘Object Head’ or the destination heads.
10.8.4 Fiscal data are also recast according to the economic and functional grouping of the activities. These are at present comprehensively compiled only in the case of the Central Government. Some State Governments also compile an economic and functional classification of the budgetary data.
System of Data Collection and Dissemination
General Budget Data
10.8.5 The Office of the Controller General of Accounts (CGA) is vested with the responsibility of compiling the accounts of the civil ministries of the Government of India. The accounting set up in the ministries comprises a Principal Account Office (PrAO) at the ministry and a large number of Pay and Accounts Offices (PAOs), which form the basic accounting unit. The PAO maintains item-wise accounts of all the transactions involving Consolidated Fund, Contingency Fund and Public Accounts. Various subsidiary accounts such as Loan and Fund accounts are also maintained by the PAOs.
10.8.6 The Government accounts compiled by the PAOs are consolidated on a monthly basis in the PrAO at the ministry. The consolidated accounts of the ministry are rendered to the CGA for further consolidation and dissemination through the website with a time lag of one month. The data provide monthly actual (un-audited) and cumulative position of major items of receipts, expenditures and fiscal balance in relation to the budget estimates of the current fiscal year as well as a comparative position for the corresponding period of the previous year. The monthly fiscal data for the State Governments are compiled by the Office of the Accountant General (AG) of the respective states with a lag of two-three months but are not disseminated to the public at present.
10.8.7 The CGA also prepares the annual accounts of the Government, comprising the Union Government Finance Accounts and the Union Civil Appropriation Accounts. These documents are presented before the Parliament after their statutory audit by the Comptroller and Auditor General of Accounts (CAG). These are published as Finance Accounts of both Central and State Governments separately. The combined accounts of both the Governments have not been published by the CAG relate to 1985-86 and not available thereafter.
10.8.8 The principal source of fiscal data is the budget documents presented annually generally in February or March to the Parliament or State Legislature. The fiscal data presented in the budget cover budget estimates (BE) for the next fiscal year, revised estimates (RE) for the current fiscal year and final account figures (un-audited) for the previous year. The budget documents also provide time series data on select fiscal variables.
10.8.9 At present, the coverage of Indian Fiscal Statistics encompasses finances of Central Government and State Governments. The Government data comprises receipts (debt and non-debt components) and expenditure (revenue and capital). The period of data coverage under the minor and major heads of receipts and expenditures are three years namely, accounts for the previous year, RE for the current year and budget estimates (projection) for the next year.
10.8.10 The details on the financial position of Public Sector Enterprises both at the Central and State levels are made available with considerable time lag. Financial results of commercial undertakings like Posts and Telecommunication, etc. at the Central level are limited to the extent of those available in the budget documents. The Railway finances are available, in detail, separately in the Railway Budget.
10.8.11 The combined budgetary position of the Central and State Governments for the major heads of receipts and expenditures are generally published with a time lag of two years in the Indian Public Finance Statistics, published by the Ministry of Finance, Government of India. The consolidated fiscal statistics disseminated by the Ministry of Finance are also classified into broad categories of developmental and non-developmental expenditures.
10.8.12 The Planning Commission, Government of India disseminates a large volume of data on Fiscal Statistics relating to Annual as well as Five Year Plans - both sector- wise outlays and mode of financing - of the Central and the State Governments.
10.8.13 The Finance Commission, Government of India is another major source of data on Fiscal Statistics. The data disseminated through the Reports of the Finance Commission mainly includes the formula-based resource transfers from the Centre to the States and inter se distribution of devolution of resources under the awards of the Finance Commission.
10.8.14 The Reserve Bank of India (RBI) compiles and publishes general Government fiscal data, including debt, derived from the budget documents of the Central Government and State Governments. The data disseminated by the RBI are as under:
The accounts of Central Government are analysed and published as an article on Central Government Finances in the RBI Monthly Bulletin within a period of two months after the presentation of Union Budget.
The accounts of Indian Railways are analysed and published as an article on Railway Finances in the RBI Monthly Bulletin within a period of two months, after the presentation of the Railway Budget.
The accounts of the State Governments and NCT Delhi are compiled, analysed and published as a comprehensive Study on Finances of State Governments. This involves two-stage data dissemination. First, a quick summary covering the aggregate position of State Governments finances, based on budgetary data, is prepared and published as an article in the RBI Monthly Bulletin, followed by a detailed study published separately within a period of 6 to 7 months of the presentation of the State budgets.
The accounts of the Central Government and State governments along with the NCT Delhi are consolidated into Combined General Government Fiscal Data and published in the RBI Annual Report and Handbook of Statistics on Indian Economy. The data disseminated by the RBI through its publication also include details on net RBI credit to Government, outstanding liabilities and explicit guarantees of both Centre and State Governments.
Reserve Bank also compiles the Consolidated General Government Fiscal Data for the purpose of the Special Data Dissemination Standards (SDDS) of the International Monetary Fund. The data are disseminated through the RBI website and published in the RBI Monthly Bulletin.
10.8.15 The Budget documents of Centre and State Governments provide details of taxes, both direct and indirect taxes. The authority to levy taxes is divided between the Union Government and the State Governments under the relevant Acts. The Union Government levies direct taxes such as personal income tax and corporate tax, and indirect taxes like custom duties, excise duties and central sales tax. The States are empowered to levy State sales tax and other local taxes like entry tax, octroi, etc.
10.8.16 The Department of Revenue, Ministry of Finance is responsible for all matters relating to the administration of Central taxes. The Central Board of Direct Taxes (CBDT) administers the direct taxes through its subordinate organisation namely, Income Tax Department while the Central Board of Excise and Customs (CBEC) is responsible for the administration of indirect taxes through Departments of Customs and Central Excise.
10.8.17 The Research and Statistics Wing of the Directorate of Income Tax (RSP&PR) of the CBDT is engaged in the collection and compilation of direct tax statistics from 300 field units located throughout the country. The data flow from the field offices of the Commissioners and Chief Commissioners of income tax to the Directorate of Income Tax (RSP&PR), where they are consolidated at the all-India level. The Directorate prepares various statistical statements and reports of different periodicities (monthly, quarterly and annual) based on the information received from the field offices. These reports and statements, essentially meant for departmental use, cater to the needs of the CBDT and Ministry of Finance.
10.8.18 The CBEC is responsible for levying, collecting and monitoring of Central excise and custom duties all over the country. The data pertaining to Central excise and customs are collected under Central Excise and Custom Law and Rules framed there under. Statistics relating to Central excise are generated on the basis of RT 12-return, a statutory return filed monthly by each Central excise assessee. The data flow from the range office (lowest formation of Central excise) to Commissionerate office through divisional offices and finally, to the Directorate of Statistics and Intelligence, which in turn submit the Reports to CBEC.
10.8.19 The major deficiencies in the present system are listed in the following paragraphs:
General Budget Data
10.8.20 Government accounts are maintained on a cash basis, i.e. transactions and events are recognised when cash is received or paid. Internationally, many Governments are switching over to accrual-based accounting. For a uniform system for compiling fiscal data and also for cross-country comparison, the Manual on Government Finance Statistics is being revised by the International Monetary Fund to enable switching from cash to accrual accounting system.
10.8.21 In the case of some State Budgets either the data on accounts (actuals) are not available or the details given are limited. In some cases, only BE and RE details in the expenditure documents are being made available. In some cases, receipt budget documents are not being prepared.
10.8.22 General Government constitutes only a segment of the public sector. The public sector undertakings are of three types namely, Government departments engaged in commercial activities such as the Railways, Corporations created under Acts of Parliament or the State Legislatures and companies having majority shareholding by the Government. In addition, there are societies promoted by government that function under separate laws applicable to them. The RE and BE of the internal and extra budgetary resources (IEBR) of the Central Public Sector Enterprises are available in the budget documents but the accounts data are not being published. Unlike the General Government, these Public Sector undertakings are not constitutionally bound to present their Annual Financial Statement, although the CAG makes an annual scrutiny of their accounts. The financial statements of these undertakings are finalised with a considerable time lag and are not uniform. Thus, the consolidated fiscal data capture only a part of the public sector.
10.8.23 The fiscal data pertaining to local Governments are not systematically codified nor presented as the budgetary operations of local Governments are generally subsumed in the States’ or Central budgets. The database relating to the local authorities for the requirement of the national accounts statistics needs to be strengthened.
10.8.24 The external debt of Government of India as presented in the budget documents is at book value. Hence, it does not reflect the true debt position of the Centre at any particular point of time.
10.8.25 The use of disclosure norms adopted in the standard budgetary practices is limited in the case of State budgets. Most of the State Government budgets do not provide the basic deficit indicators like gross fiscal deficit, revenue deficit and primary deficit. Information on subsidies (both implicit and explicit subsidies), resource position of State level Public Enterprises, budgetary support to PSUs, information on outstanding liabilities are not generally presented in the State budget. The State Governments also do not provide high frequency data on major fiscal indicators on a monthly basis as is the practice followed by the Centre. A ‘Core Group on Voluntary Disclosure Norms for State Governments’ constituted with the select group of Finance Secretaries under the initiatives of the RBI has gone into these issues and has made certain recommendations. These include among others the introduction of a Budget at a Glance (BAG) along the lines presented in the Central Government budget. Ten State Governments have already introduced ‘BAG’ in their budgets for 2000-01. The Committee has also recommended the introduction of a Budget Summary as a medium-term measure for enhancing transparency in the State budgets.
10.8.26 Though the Fiscal Statistics released by the Government of India are consistent with the IMF manual on Government statistics and the country is fulfilling the requirement under SDDS, there are certain areas of data gap in relation to the IMF code of good practice on Fiscal Transparency. These are inter alia the deficiency in compiling and publishing some of the important indicators of fiscal policy, for instance: operational balance, tax expenditures, quasi-fiscal activities, net worth and also information relating to fiscal risks such as contingent liabilities, impact of variation in the assumption on fiscal forecasts. There are also some indicators, which reflect the structural weakness of Government finances such as structural or cyclically adjusted deficit and liquidity balance, which are not covered in the Indian Fiscal Statistics. These gaps were serious in respect of fiscal data pertaining to State finances.
10.8.27 The recently introduced Fiscal Responsibility and Budget Management Bill, which if passed, and becomes an Act would provide the necessary legal and institutional arrangement to make the budget processing more transparent in respect of the budget for the Centre.
10.8.28 The budget presents only the aggregate heads of major taxes both at the level of the Centre and State, and does not reflect the sector-wise collection or assessee’s status-wise details. The estimates for State-wise devolution of taxes and duties are disseminated through the budgets. Details regarding tax refunds, tax arrears, accruals, cumulative collected for the previous years are not reflected in the budget. Similarly, only estimates are available for additional resource mobilisation measures proposal announced in the Budget. Tax expenditures arising in the context of various exemptions that are extended under various tax laws, are not reflected in the budget. The All India Income Tax Statistics (AIITS), an annual publication of the Income tax Department is based on a very small sample size and published with a considerable time lag.
Conclusions and Recommendations
10.8.29 In the foregoing sections, the current status of the fiscal data is assessed from the point of view of adequacy, timeliness and reliability. Such analysis revealed that the Central Government disseminates a detailed data set on Fiscal Statistics while the status of the States is not relatively robust. In view of the detailed review presented above, the Commission recommends the following:
General Budget Data
The Expenditure Budget of Central Government provides data on Budget Estimates and the Revised Estimates of Internal and Extra Budgetary Resources (IEBR) of the Central Public Sector Enterprises. The account (actuals) figures on resources raised by these enterprises against the Budget Estimates (BE) and Revised Estimates (RE) are not available. Therefore, the details of actuals of IEBR (including the amount of External Aid) should be published in the Budget.
The accounts data on State-wise distribution and devolution of income tax, basic and additional excise duties, etc. are not published in the Receipt Budget of Government of India while the Budget Estimates (BE) and Revised Estimates (RE) are available. The account data on amounts of devolution actually transferred to the States are available elsewhere in the publications of Ministry of Finance and the Planning Commission. Therefore, the accounts data should be provided in the Budget documents for the subsequent years for the purpose of consistency.
Tax expenditure, which arise in the context of various exemptions that are extended under various tax laws, are yet to be quantified. Therefore, the details on both tax expenditure and implicit subsidies, tax arrears and tax refunds should be provided in the budgets of the Central and the State Governments.
The Combined Finance and Revenue Accounts published by the Comptroller and Auditor General of Accounts (CAG) is the only source where the Fiscal Statistics of both the Centre and individual States are published. At present, there is a considerable time lag in this publication. This publication should be released promptly and regularly.
The detailed data of State Finances on a comparable basis is not available in the country. Though the RBI does publish an annual consolidated study, there persists a need to have a detailed and comparable data set for each State – individually and consolidated. There are significant differences in the budgetary practices between different States. There has to be a uniform classification of a proper plan to classify the data on a comparable basis, eliminating inter and intra-Government transfers. The Central Government should therefore, ensure that such data are compiled and disseminated on an early basis.
No published information is available on various Centrally sponsored schemes. Therefore, the data on financing pattern of Centrally sponsored schemes in different States and the expenditures incurred in different States from Central funds and States’ own contributions should be compiled and disseminated along with the Budget documents.
The State Governments do not provide high frequency data on major fiscal indicators on a monthly basis as is the practice followed by the Central Government. Therefore, the State Governments should make available to the public the data on major fiscal variables on a monthly basis.
To assess the current system of accounts and budgets of local bodies, and to establish uniform budget practices for local bodies on the pattern of Central and State Governments, a system of consolidation of accounts by the States should be evolved and thereafter followed at national level. At the initial stage, the accounts of bigger local bodies such as those of the metropolitan cities, municipal corporations and municipalities should be taken up completely, while the accounts of smaller bodies be covered through suitably designed sample surveys. The securities issued by the local bodies should be published in the State Government budgets.
The issue of providing guarantees has significant implications for the sustainability of the fiscal position of the Governments – Central and States. Further, some forms of guarantees, like the letters of comfort issued by State Governments to banks and financial institutions, are in nature of implicit guarantees, which are not included in the present estimates of guarantees in India, but are internationally treated as guarantees. Therefore, adequate arrangements for reporting and monitoring of guarantees granted by Central and State Governments should be instituted.
The draft Manual on Government Finance Statistics 2000 of the International Monetary Fund (IMF) favours the revised principle of recording the flows on accrual basis switching over from the current system of cash basis. Accordingly, the Government may consider, in due course, dissemination of Fiscal Statistics on an accrual basis as per advice of the Comptroller & Auditor General of India (CAG).
The details regarding the tax records, revenue as raised, revenue foregone on account of concessions contained in the budget proposals, receipt on tax arrears of the previous years and taxes collected through special schemes are not separately indicated. This data in gross and net terms should be given in the Budget Documents in a more transparent and detailed manner.
The data on tax revenue of Central Government should be disseminated promptly and State wise break-up made available.
The data published by the Directorate of Income Tax (RSP&PR) in its All India Income Tax Statistics (AIITS) are based on estimates derived from a small sample size and is therefore rendered unrepresentative. Therefore, the sample size and design should be modified to make it more representative and broad-based considering the manifold increase in the number of assessees. Further, the time lag in the publication should also be reduced.
The computerisation and net working of Field offices of the Central Board of Direct Taxes (CBDT) and Central Board of Excise and Customs (CBEC) should be completed on a priority basis for improving the data quality, better management and speedier transmission of data from the field offices to the Directorates at the Centre. To generate a comprehensive database on various aspects of Direct and Indirect Tax Statistics, the CBEC and CBDT should generate profiles of all tax assessees by computerisation of various returns filed by them.
The organisational set up for collection of statistics in the field offices of CBDT and CBEC should be strengthened. The Research and Statistics Wing, Directorate of Income Tax should be the nodal agency on all statistical activities and should function directly under CBDT. A Research Unit should also be set up in CBDT to undertake research studies on various aspects of tax planning.
A data warehouse for Fiscal Statistics at the National level within the Department of Economic Affairs (DEA) should be established. Such an institutional mechanism is intended to collect, compile and store the data generated and disseminated by various official agencies which would not only help to build up a comprehensive database on Indian Fiscal Statistics but also to identify the data gaps at the macro and micro levels.