The ₹33,000 Crore Question That India’s Auditor Never Asked

By P. SESH KUMAR

An opinion piece argues that West Bengal’s fiscal crisis stems as much from weak revenue mobilisation as from spending, questioning whether the CAG failed to connect the dots in its own audit findings.

New Delhi, July 31, 2026 — Somewhere in the middle of a report that almost nobody read, the Comptroller and Auditor General of India (CAG) printed two percentages side by side: West Bengal collects 5.38 per cent of its economy as its own tax revenue against a general-States average of 6.60, and 0.14 per cent as non-tax revenue against an average of 1.04.

Apply the peer averages to the State’s own gross domestic product, as the CAG did not, and the missing money comes to Rs 32,996 crore. The State’s revenue deficit for that year, restated by the same CAG thirty pages earlier, was Rs 32,074 crore.

Average revenue effort alone would have wiped out the deficit entirely. That subtraction is the whole argument of this essay, and its point is not about Bengal. It is that the difference between the audit report India got and the audit report India was owed is not information, not access, not mandate and not staffing. It is nerve.

What follows walks through what one State’s accounts for the year ended March 2023 actually disclose — three of four fiscal ceilings breached on the CAG’s own corrected numbers, Rs 3.20 lakh crore of expenditure for which no evidence of application exists, Rs 53,016 crore spent without the constitutional authority the Constitution requires, a pension promise never once valued– and then asks the harder question of why the CAG that found all of it wrote none of it down in a form anyone would have to answer for. The strongest defences of both the State and CAG are set out before the verdict, because they are better than critics of either usually allow.

THE SUBTRACTION NOBODY PERFORMED

There is a particular kind of institutional failure that leaves no fingerprints, because nothing is concealed. Every number is printed. Every table is accurate. The arithmetic is simply never completed, and the completed arithmetic is what would have been actionable.

Consider West Bengal for the year ended 31 March 2023. The State’s economy grew at 14.01 per cent in that year and at an average of 10.02 per cent over the preceding five. Its revenue receipts grew at 8.55 per cent, its revenue expenditure at 9.68. There is the deficit in three numbers, and no amount of growth will close a gap opened by a State that spends faster than it earns for five consecutive years.

But the interesting failure is not the deficit. It is the revenue side. The auditor’s own peer benchmarking establishes that Bengal’s non-tax revenue of Rs 2,197 crore was the lowest of any general State in the Union — not lowest per capita, lowest. It further establishes the two ratios quoted above.

What it never does is multiply. Apply 6.60 per cent to the report’s own GSDP of Rs 15,54,992 crore and the State should have raised Rs 1,02,629 crore in own taxes against Rs 83,608 crore actually collected— a shortfall of Rs 19,021 crore. Apply 1.04 per cent for non-tax revenue and the shortfall is Rs 13,975 crore. Together, Rs 32,996 crore, against a restated revenue deficit of Rs 32,074 crore.

That is my computation, not the CAG’s, and I flag it as such: it appears nowhere in the report, It is one line of a spreadsheet. Had it been in the executive summary, the political conversation about Bengal’s finances would have had a different centre of gravity for the last three years. Instead of a State pleading that Delhi has withheld its dues, we would have had a State explaining why it declines to collect its own.

PAGE SIXTEEN, AND THE COMPLIANCE TABLE THREE PAGES EARLIER

The mechanism of quarantine is visible in the report’s own layout. On page fourteen, a table reports the revenue deficit target as achieved: 1.76 per cent of GSDP against a ceiling of 1.82. On pages sixteen and seventeen, the CAG ‘restates’ the accounts–misclassification of revenue expenditure as capital, non-accountal of liabilities — and arrives at a revenue deficit of Rs 32,074 crore rather than the Rs 27,295 crore disclosed, and a fiscal deficit of Rs 51,342 crore.

The restated revenue deficit is 2.06 per cent of the same GSDP the report uses everywhere else. That is a breach. It never travels three pages backwards into the compliance table, nor forwards into the conclusions, nor into the summary that journalists and legislators actually read.

Nor is it the only ceiling to fall. Interest payments consumed 20.46 per cent of revenue receipts against the 19.75 per cent ceiling in the State’s own Fiscal Policy Strategy Statement. Outstanding debt stood at 37.63 per cent of GSDP against a statutory target of 34.30.

Public debt repayment absorbed 42.38 per cent of public debt receipts, leaving net borrowing actually available to the State of Rs4,435 crore against Rs 17,374 crore two years earlier– a State running harder to stand still.  Of four applicable ceilings, three were breached. The fourth survived by twenty basis points, roughly Rs 3,100 crore, on the restated figure.

And beneath the annual scorekeeping lies a nine-year fact that the annual format is structurally incapable of stating. The West Bengal fiscal responsibility legislation, as amended in 2011, required the revenue deficit to be eliminated with effect from 2014-15.

It has not been eliminated in any year since. What the State does instead is budget a revenue deficit and then report achievement against its own budgeted number, and what the CAG does is test compliance against the Executive’s annual restatement of its ambitions rather than against the Act of the Legislature.

Measured against the statute, Bengal has been in continuous breach for nine years. No audit report says so, because each report only looks at one year, and the format asks whether the target was met rather than whether the law was obeyed.

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WHAT CANNOT BE CERTIFIED AT ALL

Here the story stops being about ratios. Grants aggregating Rs 3,20,774 crore, covered by 5,08,222 utilisation certificates, remained unvouched as on 31 March 2023. The State’s total expenditure for that year was Rs 2,45,413 crore.  The unevidenced sum exceeds the whole of one year’s government.

The stock is not clearing: since the 2018-19 report the number of outstanding certificates has risen by 42.50 per cent and their value by 59.77. Government has prescribed no mechanism requiring a certificate to distinguish Central from State share, so the sum cannot even be apportioned between two exchequers.

Around it sit the familiar satellites: detailed contingent bills of Rs 1,238 crore in 7,703 cases never submitted against abstract contingent drawals; Single Nodal Agency expenditure for Centrally Sponsored Schemes with no detailed vouchers at the treasury; thirteen of 159 administrators of Personal Deposit Accounts having reconciled their balances.

In any other audit tradition on earth, this is not a housekeeping chapter. It is a limitation on the scope of audit, and a limitation on scope of that magnitude produces a qualified opinion, because the auditor cannot say what happened to the money.

In the Indian State Finances Audit Report it produces Chapter IV, a paragraph, a recommendation identical to last year’s, and a certificate that proceeds regardless. The word “qualification” does not appear because the format does not contain a place to put it.

Two further facts belong in any honest opening. Expenditure of Rs 4,063 crore in excess of grants voted for 2022-23, and Rs 48,953 crore relating to the years from 2009-10 onwards, remains unregularised by the Legislature–Rs 53,016 crore of public spending standing, as of the report, without the constitutional authority Article 205 requires.  And Rs 2,084 crore was spent in the year with no provision in the original estimates, no supplementary demand and no re-appropriation order: not expenditure in excess of a grant, but expenditure against no grant at all.

THE CAPITAL THAT ISN’T THERE

The State disclosed capital expenditure of Rs 22,009 crore. Strip out Rs 3,231.57 crore of revenue expenditure misclassified as capital, contrary to the accounting standard on grants-in-aid.  Strip out Rs 23.32 crore of unspent money parked in a District Magistrate’s deposit account. Strip out Rs 4,100 crore of capital funds drawn from treasuries by non-government drawing and disbursing officers in contravention of the Treasury Rules, which audit could not trace to any asset.

What survives as verifiable capital formation is not more than Rs 14,654 crore — under 6 per cent of total expenditure, against a general-States average of 15.22 per cent.  Bengal is not investing at half its peers’ rate. It is investing at rather less than half. That residual is mine, and the ₹4,100 crore is characterised in the report as irregular drawal rather than as loss; I treat it as unverifiable, which is a statement about evidence and not about theft.

The Appropriation Act, meanwhile, was not a reliable statement of intent. Against provisions of Rs 3,90,638 crore the State spent 81 per cent. Savings were Rs 70,752 crore, of which one rupee in nineteen was formally surrendered — meaning that for Rs 67,070 crore the departments neither spent the money nor told the Finance Department they would not.

Supplementary provisions of Rs 8,773 crore were voted across thirty-two grants where the original provision was never exhausted, so the House was asked for money on a statement of need that the department’s own conduct disproved. Deviation of outturn from budget ran to 12.58 per cent in Revenue (Voted), 37.58 in Capital (Voted) and 50.74 in Capital (Charged), and six sub-heads spent their entire year’s money in March alone.

The report describes all this using the vocabulary of the Public Expenditure and Financial Accountability (PEFA) framework– “aggregate expenditure outturn”, “expenditure composition outturn”– while declining to apply the grades that give those phrases meaning. On PI-1 and PI-2 these numbers attract a D, the lowest score available.  Borrowing a framework’s words and refusing its verdicts is not rigour. It is camouflage.

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THREE LIABILITIES ON NO STATEMENT BEFORE THE HOUSE

West Bengal is the only State in the Union never to have extended the National Pension System to its employees. Its entire post-2004 pension obligation is an unfunded promise on the Consolidated Fund. Pension expenditure was Rs 24,624 crore, 12.59 per cent of revenue receipts, compounding at 11.27 per cent a year over five years against revenue receipt growth of 8.55.

No actuarial valuation exists. None has been laid before the Legislature. Compound the two observed rates for twenty years – a mechanical extrapolation, not an actuarial estimate, blind to pay commissions, longevity and retirement bulges, and offered only as an order of magnitude — and the pension bill reaches roughly Rs 2.09 lakh crore against receipts of Rs 10.09 lakh crore, or 20.7 per cent of all revenue. The precise number does not matter.

What matters is that the gap between an eighth of revenue and a fifth of revenue is not a rounding error, and that a government which has never measured it is flying on instruments it has not installed.

The second liability is electrical. Against guarantees of Rs 17,677 crore, the State received commission of Rs 9.90 crore where Rs 22.60 crore was due. The reasons are more eloquent than the figures: the distribution company applied to have Rs 58.84 crore waived and was told the Finance Department has no power to relax an Act of the Legislature; Durgapur Projects Limited said Rs 121.76 crore could not be paid owing to acute financial crisis; the power development corporation cited cash flow. Separately, the distribution company owed the generating and transmission companies Rs 9,071 crore, of which Rs 4,328 crore was more than a year overdue, with its Annual Performance Reviews–which determine the regulatory assets carried in its books –pending before the Regulatory Commission.

A guarantee whose commission the guaranteed entity cannot afford is a guarantee likely to be called, and the State’s true contingent exposure is unquantifiable so long as the regulatory asset position remains unsettled.

The third is the cheapest and the most quietly absurd. The State closed the year holding Rs 32,039 crore in cash and investments, earning Rs 112 crore, while paying an average 7.35 per cent on its public debt. Of that pile, Rs 13,419 crore was earmarked; the free Rs 18,632 crore carried an implied annual cost near Rs1,370 crore– a net carry of some Rs 1,250 crore, about four per cent of the restated revenue deficit.  No State can run to zero; the point is not that the cushion is wrong but that its price has never once been computed, disclosed or defended.

LITURGY

Two further facts, and then the case for the defence.

Revenue raised and not realised stood at Rs 10,318 crore, of which Rs 2,781 crore was undisputed– nobody was contesting it–and of that, Rs 489 crore had been outstanding beyond ten years. Undisputed arrears of that vintage are not arrears; they are a decision not to collect, taken by nobody in particular, and they equal about nine per cent of the deficit.

Separately, Rs 380.50 crore of interest earned on unspent scheme funds lay in commercial bank savings accounts and never entered the exchequer at all; the CAG had reported this the previous year, recorded that diversion could not be ruled out, and found no mechanism framed a year later.

And the misclassification that drives the understated deficit was reported in 2016-17, 2017-18, 2019-20, 2020-21 and 2021-22 before recurring in 2022-23 to the tune of Rs 2,280.65 crore under a single urban scheme.

Minor Head 800 absorbed Rs 6,515 crore across sixty-five major heads, the auditor’s own phrase being that the issue had been left unaddressed.  A recommendation made six times without consequence is not a recommendation. It is a liturgy, and the CAG has been reciting it beautifully.

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THE CASE FOR THE DEFENCE

Both defendants deserve their best argument, and both have one.

For the State: the year in question sat in the shadow of the expiry of GST compensation, and a State that had built its revenue architecture around an assured transfer lost it on a fixed date not of its choosing. Central transfers under several schemes were withheld or delayed in ways no State auditor is positioned to adjudicate.

A low non-tax revenue ratio is not automatically indolence– it can be a decision not to price water, health and transport at rates that fall hardest on the poor, which is exactly what a State whose politics is built on Lakshmir Bhandar, Swasthya Sathi and Kanyashree would decide.

Committed expenditure at 63.89 per cent of revenue receipts leaves thirty-six paise in the rupee of discretion, and how those paise are spent is a question for the electorate and not the auditor.

Cash transfers to women do not appear in any capital formation ratio, and the ratio is not therefore the measure of a government.

For the CAG, the defence is stronger still and is almost never stated. The State Finances Audit Report is not a financial attest report; certification of the Finance Accounts is a separate statutory act, and demanding a qualified opinion in a document not designed to carry one is a category error.

The format is centrally prescribed, comparable across twenty-eight States, and an Accountant General who unilaterally invented an opinion paragraph would be substituting personal judgement for institutional consistency– the very vice audit exists to police.

Pending utilisation certificates lie with grantees, often panchayats and societies of genuinely limited capacity, and pendency is emphatically not proof of misapplication. The misclassification of pass-through grants is partly an artefact of Union scheme design.

And the offices concerned are chronically short-staffed, doing a horizontal audit of a State budget with a fraction of the establishment a comparable national audit office would field.

I accept all of it, and it does not save the report. Every one of those defences explains why the CAG might not add a chapter. Not one explains why the CAG, having corrected the deficit on page sixteen, tested compliance on page fourteen against the figure it had just corrected.

Not one explains why a scope limitation exceeding a full year’s expenditure is narrated rather than treated as one. Not one explains why the peer ratios were computed and then not multiplied. These are not resource failures. They cost nothing. The restatement was already done.

The peer ratios were already there. The pension growth rate was already calculated. What was missing was the willingness to divide one number by another, put the answer where a reader would find it, and sign something a Secretary might have to argue with.

THE AUDITOR IN THE MIRROR

Which brings the argument to its uncomfortable end. The report for 2021-22 was handed to Government in April 2023 and had not been laid. Those for 2018-19, 2019-20 and 2020-21 were laid on one day in March 2022 after waiting between two and nineteen months apiece. Public Accounts Committee recommendations from February 2021 remained unanswered.

The report discussed here — for the year ended March 2023, numbered as of 2024 — reached the Bengal Assembly in July 2026, in a batch of twenty-eight, by which time the officers were transferred, the files weeded and the money long spent.

Article 151(2) obliges the Governor to cause these reports to be laid and fixes no time for it. The auditor has no power to compel its own publication–but it has never used the powers it does have. Nothing prevents the CAG from publishing and maintaining a public register of every report submitted to every Governor with the date of submission, so that the interval before laying becomes a matter of record from the day it begins.

Nothing prevents each recommendation carrying the year it was first made and the number of times it has been repeated, so a legislature can see at a glance which findings the Executive has decided simply to outlast. Nothing prevents a finding material to the accounts, reported three times without remedy, being sent to the Governor as a separate report under Article 151 rather than as a paragraph that can be buried in a batch of twenty-eight.

And nothing prevents the CAG telling a House the structural fact that the Finance Accounts it audits are compiled by its own accounting wing– that the Legislature’s auditor is also its book-keeper– which these reports have never once disclosed.

A closing caveat, because the argument requires one. Everything above rests on a single document and on my own arithmetic upon it. I have not gone behind the report to the Finance Accounts, the Appropriation Accounts or the departmental files, and a proposition resting on one source remains a single-source proposition even when the source is the auditor of the State.

But that is also the entire point. Nothing here needed a further day of fieldwork, a new mandate, a constitutional amendment or one extra sanctioned post. Every figure was already in the CAG’s own volume, most of them within twenty pages of each other.

Audit institutions do not lose their teeth by having them pulled. They lose them by declining, year after year, in the interests of a quiet relationship and a template that comforts everybody, to bite.

(This is an opinion piece. Views expressed are the author’s own.)

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