Context and Significance
- The Comptroller and Auditor General (CAG) met with the 16th Finance Commission in Bhopal, marking a crucial phase in assessing India’s financial landscape.
- The consultation was aimed at addressing fiscal challenges and enhancing financial transparency across Union, State, and local government levels.
Relevance : GS 2(Polity)
Key Focus Areas of Deliberation
- Union and State Finances: Examined expenditure trends, non-debt receipts, and fiscal stress points.
- Local Bodies: Emphasis on harmonization of accounting practices and fund transfers.
- Public Sector Enterprises (PSEs): Addressed financial viability and performance challenges.
Major Fiscal Challenges Identified
- Revenue Gaps: A significant mismatch between expenditure and non-debt receipts at both Union and State levels.
- State Own Tax Revenue (SOTR) Decline: Varying levels of SOTR across States and reduced revenue buoyancy impacting fiscal stability.
- Off-Budget Borrowings: Need for greater transparency and regular reporting to prevent fiscal mismanagement.
- FRBM Act Compliance: Ensuring adherence to fiscal deficit targets and addressing post-audit liabilities.
Technology-Driven Revenue Optimization
- Enhancing Stamp Duty & Excise Collections:
- Regular updates to market value guidelines.
- Improved classification of property types.
- Adoption of sensor-based systems and QR codes to minimize leakages.
- GST Administration Reforms:
- Expanding the tax base by integrating unregistered goods and service providers into the formal economy.
- Automated data collection and real-time monitoring to enhance transparency.
- Strengthening taxpayer verification mechanisms to curb tax evasion.
Strengthening Financial Management at the Local Level
- Harmonization of Local Body Accounts:
- Standardizing accounting practices across Central, State, and local governments.
- Immediate implementation in the top 100 cities to streamline financial reporting.
- Use of Integrated Financial Management System (IFSM):
- Onboarding local bodies to ensure efficient fund transfers.
- Enhanced accountability and financial discipline in urban and rural governance.
Strategic Implications and Way Forward
- Improved Fiscal Prudence: Strengthening reporting mechanisms and compliance frameworks.
- Increased Revenue Mobilization: Leveraging technology for better tax collection and reducing leakages.
- Local Governance Strengthening: Enhancing financial autonomy and transparency in local body operations.
- Aligning with Long-Term Fiscal Goals: Ensuring that revenue growth aligns with developmental priorities without exacerbating fiscal deficits.
