Column : Where did the rupee go?

The government of India (GoI) finances the bulk of its social welfare schemes through a transfer mechanism known as the centrally sponsored schemes (CSS). CSS are specific purpose fiscal transfers from the GoI to state governments for implementing social sector programmes. GoI funds and designs these schemes while state governments implement them. Almost all of the United Progressive Alliance’s flagship social welfare programmes, including the MGNREGA, are designed as CSS.

To implement CSS, GoI transfers funds either directly to the state government treasury or to specially created societies. Within the government’s accounting system, the act of releasing funds is treated as an expenditure. A similar procedure is followed for fund release at each subsequent level. So, when funds are transferred from the state departments to the district, these are again recorded as expenditures and so on. Thus, central, state and district level government expenditure statements are merely statements of intent—a list of funds released to the next level of government—rather than actual expenditures.

For CSS financed through the state treasury, actual expenditures are captured through the annual audited accounts of the government but these have a two-year time lag and are hampered by poor quality record keeping. To add to the confusion, the audited accounts and annual expenditure statements prepared by line departments are

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