CAG Audit Sniffs Out Errors in Centre’s Fiscal and Revenue Deficit
Finance minister Arun Jaitley arrives to present Budget at Parliament House.
Finance minister Arun Jaitley arrives to present Budget at Parliament House. (Photo: Reuters)

CAG Audit Sniffs Out Errors in Centre’s Fiscal and Revenue Deficit

The Comptroller and Auditor General of India (CAG) pointed out a few errors in the Union government’s accounting procedures for financial year 2015-16 in its latest report, which might have led to the underestimation of the fiscal and revenue deficit for the same year.

The audit report on the obedience of rules by the government and the targets set by the Fiscal Responsibility and Budget Management (FRBM) Act 2003 have pointed out that the government had delayed payments accounting to more than Rs 1.87 lakh crore in 2015-16, which might have also made a difference to the fiscal and revenue deficits for that year, The Hindu reported.

As a result of deficiency in estimating the expenditure on grants for creation of capital assets, the provision included in the Budget at a Glance for grants for creation of capital assets was underestimated by ₹18,827 crore, which has also impacted the correct estimation of effective revenue deficit.
The Controller and Audit General of India

The report further added that because of lack of classification of revenue expenditure as capital expenditure and the lack of classification of capital expenditure as revenue expenditure, the revenue deficit was shown to be Rs 1,583 crore less during FY 2015-16.

Apart from that, the Rs 20,911 crore collected in levies and cess had not been transferred to the relevant funds, which led to an “understatement of revenue/fiscal deficit by an equivalent amount” during 2015-16, The Hindu further reported.

The report also brought to light the fact that at the end of 2015-16, subsidy claims worth Rs 1,62,530 crore relating to fertiliser, food and fuel (petroleum) were lying pending and that the delegation of taxes to states were short by Rs 24,942 crore in the same year, which would have surely made an impact on the deficit ratios for 2015-16.

“Though the accounts of the government are prepared on cash basis, yet the deferment of liabilities to subsequent year cyclically has a bearing on computation of fiscal indicators,” the Hindu quoted the CAG report as saying.

The practice of deferring committed liability on the ground that accounts are prepared on cash basis, while serving as an instrument to contain the current level of deficit, may not ensure inter-generational equity in fiscal management as envisaged in the [FRBM] Act.

Variation in Budgets

CAG also said that there were many issues with the government’s account statements’ transparency.

Refunds of ₹1,29,482 crore were made from gross direct tax collections in FY2015-16 but no corresponding disclosure was available in the government accounts.
Report

It also said that variations were observed in the debit figures shown in the Budget at a Glance and the annual financial statements of the government and such similar variations were seen when the actual expenditure on finances for the creation of capital assets were revealed.

The CAG also pointed out that the government had not been able to meet the FRBM targets for the 2015-16 year on both fiscal and revenue deficits and that it had changed the targets and deadlines without making due changes in the Act at first.
During 2015-16, in respect of all the three deficit indicators, viz. effective revenue deficit, revenue deficit and fiscal deficit, the annual reduction targets were not in accordance with the provisions of the FRBM Act/Rules.
Report

(WIth inputs from The Hindu)

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