Discuss why India lacks comparable expenditure data across States. How would standardising expenditure classification strengthen fiscal federalism?

Under Article 150, the President prescribes, on the CAG's advice, a common form of accounts for the Union and the States. In practice, State spending data is still not comparable. States define spending categories, cover institutions and present figures differently. This weakens benchmarking between States and weakens Union–State fiscal bargaining.

Why comparable data is lacking

• Shifting definitions: In 2011, the CAG put Tamil Nadu's committed expenditure at about 71% of revenue receipts, including subsidies [1]. PRS counts only salaries, interest and pensions, which gives 63% (2024-25) and 61% (2026-27) [2]. The fall looks like progress, but the two figures count different items.
• Elastic "capex": RBI counts loans and advances as capital expenditure [3]. A State that lends to its own enterprises can therefore report "investment" without creating any assets.
• Uneven coverage: Some States spend through corporations, boards and special-purpose vehicles that sit outside the budget. The reported spending base therefore differs from State to State.
• Blurred welfare heads: States record subsidies and cash transfers under different heads. PRS identifies their rapid growth as a pressure that needs rationalising [4].
• Mixed vintages: Analysts often compare Budget Estimates, Revised Estimates and Accounts figures for different years, which distorts the comparison.

How standardisation strengthens fiscal federalism

• Fairer transfers: Finance Commissions (Art. 280) could assess needs and reward efficiency using like-for-like data.
• Credible peer benchmarking: Tamil Nadu's interest bill is 22% of its revenue receipts [2]. That number becomes useful for competitive federalism only when every State uses the same definitions.
• Trust in borrowing limits: Declaring off-budget liabilities on the same basis everywhere would reduce Union–State disputes over Art. 293 borrowing ceilings.
• Outcome-based budgeting: The IMF recommends making spending reviews part of the annual budget cycle [5]. Common definitions are what make it possible to spot leakage and duplication.
• State-led reform: Recent State initiatives, such as Tamil Nadu's review of welfare and public spending, show that States can design common standards from the bottom up instead of having them imposed by the Centre.

Common definitions → comparable data → fair FC transfers
                   → peer benchmarking → better quality of spending

Flow: standardisation as the base of cooperative fiscal federalism

India's data gap comes from definitions and coverage, not from a lack of data. A common template agreed by the CAG, RBI and the Finance Commission would fix much of it. States should report capex both with and without loans, and committed spending both with and without subsidies. This would turn fiscal federalism from a negotiation over disputed numbers into one built on trust. It would also advance SDG 16.6, which calls for accountable institutions.