Fudging the Fiscal Map? CAG Report Exposes Fault Lines in Budget Math
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Delayed Report Flags Hidden Subsidies, Off-Budget Liabilities, and Weak Accountability; Calls for Real-Time Reforms and Stronger Parliamentary Oversight
By P. Sesh Kumar
NEW DELHI, July 22, 2025 –When the Comptroller and Auditor General (CAG) of India finally tabled its audit report on the Union Government’s finances for FY 2022–23 in July 2025, it struck like a thunderclap in an already turbulent monsoon session. Though delayed — painfully so — the findings still packed a punch. The report exposes a string of discrepancies in the Centre’s fiscal accounting that raise serious concerns about transparency, accountability, and the credibility of India’s official financial statements.
While the top-line fiscal deficit numbers may appear in order, a closer look reveals significant gaps that India can no longer afford to overlook.
The Good News First — On Paper
Superficially, there’s a semblance of fiscal discipline. The Centre managed to keep its reported fiscal deficit for 2022–23 within the revised estimate of 6.4% of GDP. Tax revenues showed buoyancy, non-tax revenues were healthy (thanks largely to PSU and RBI dividends), and capital expenditure saw reasonable growth. The Public Financial Management System (PFMS) appeared to have streamlined payments and plugged leakages.
But CAG’s audit cuts through this digital sheen. As always, the devil lies in the disclosures — or the lack thereof.
Creative Bookkeeping and Material Misstatements
The report points to major variances between what was presented in Parliament and what actually transpired. Key items like advances from the National Small Savings Fund (NSSF), major subsidies, and deferred payments were not transparently disclosed. Even though off-budget borrowing has officially been phased out, its residual impact still lingers — unreflected in headline figures.
Most troublingly, CAG notes that excess expenditure over Parliament-sanctioned grants — a core issue of legislative control — was neither acknowledged nor regularized, violating Article 115 of the Constitution.
In my book CAG: What It Ought to Be Auditing, I argue that without a clear system of incentives and penalties for ministries, such financial transgressions will persist. Unfortunately, the Public Accounts Committee (PAC) often regularizes these irregularities with only perfunctory criticism — eroding the principle of legislative accountability.
This is not just a procedural lapse; it strikes at the very core of democratic financial governance.
The Cost of Delay: A Report Two Years Too Late
The audit for FY 2022–23 arrived in mid-2025 — nearly two years late. By then, the government had already presented the FY 2024–25 budget. This renders the audit almost useless for real-time correction. It’s like a fire brigade arriving years after the blaze — just to draft a report on what went wrong.
Such delays severely dilute Parliament’s oversight role, allowing the executive to function unchecked.
PFMS: A Silver Bullet or a Digital Mirage?
The PFMS was meant to be the answer to India’s budgetary opacity — a digital dashboard enabling real-time tracking of fund flows and scheme expenditures. But CAG still found mismatches, delayed entries, off-book expenditures, and classification errors.
Why? Because PFMS is only as good as the data it receives. Ministries continue to postpone entries, adjust accounts post-facto, or route funds outside the Consolidated Fund, bypassing PFMS entirely. The result is a facade of control, hiding a swamp of fiscal distortions.
Why It Matters Now
The CAG’s report lands at a time when India’s fiscal credibility is under global scrutiny. International credit agencies and domestic policy analysts are closely watching India’s path to fiscal consolidation.
If discrepancies in revenue and expenditure figures go uncorrected, they not only erode investor confidence but also undermine constitutional legitimacy. Presenting manipulated or partial figures to Parliament betrays the spirit of legislative supremacy.
Why These Discrepancies Persist
Some reasons are tactical — creative reclassification to make deficit figures appear better. Others are structural — a lack of strict penalties for violating expenditure norms. And many are political — the urge to announce headline-grabbing schemes without backed allocations.
The love for supplementary grants, chronic delays in fund releases, and poor inter-departmental reconciliation all contribute to a fiscal system riddled with gaps no software can fully fix.
CAG: Time to Level Up
The CAG deserves credit for a detailed report, but its audit cycle needs modernization. Two-year-old reports have limited value. The CAG must adopt quarterly or half-yearly audits for high-risk sectors and release fast-track findings in near real-time.
Equally important is a sharper tone in audit language. Phrases like “not transparent” or “not adequately disclosed” should be replaced with clear, quantified impacts on the fiscal deficit, expenditure deviations, or budget reliability.
Beyond the Numbers: Who Is Accountable?
Instead of merely listing financial anomalies, CAG must publish an accountability map:
- Which ministry delayed reconciliation?
- Which financial controller failed oversight?
- Was the lapse systemic or deliberate?
CAG should name ministries with chronic violations and recommend penal provisions for persistent offenders.
Prescriptions for Reform
- Mandatory quarterly reconciliation of PFMS with RBI data.
- Publish dashboards tracking subsidy accounting and extra-budgetary borrowings.
- Recommend time-bound corrective action and amendments to the FRBM Rules to expand the definition of fiscal deficit.
- Enforce penalties for ministries that spend beyond grants without post-facto approval.
From Post-Mortems to Prevention
India’s budgetary process is no longer a dusty ledger affair — it’s a dynamic and high-stakes arena. The CAG must now evolve from being a rear-view mirror to becoming a dashboard with foresight.
It must be an informed referee, not a passive scribe. Unless its voice becomes sharper and more timely, even the most damning audit will remain just another unread PDF buried in Parliament’s monsoon flood.
The Final Word
India’s fiscal framework has undoubtedly embraced digital transformation. But technology cannot replace constitutional propriety. PFMS may track every rupee, but only strong institutions and bold audits can enforce fiscal integrity.
The CAG has flagged the cracks. The question is: will Parliament, ministries, and citizens fix them — or wait for the system to crack further?
(This is an opinion piece, and views expressed are those of the author)
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