CAG flags understated govt liability in FY18, FY19

The Centre undertook a clean-up drive of its books in the Budget for FY22, transferring certain below-the-line food subsidy to above-the-line and clearly showing extra-budgetary mop-ups, in a marked shift towards transparency in accounting.

A similar exercise for FY19 showed that actual liabilities were 49.82% of GDP, higher than the estimated central government debt of 44.92%.

The government took on additional liability each year from FY15 to FY19 ranging from 3.1% of GDP to 4.7%, even though the target set in the FRBM frame-work relating to total liabilities prior to the April 2018 amendment implied that the Centre would not take on any additional liability after FY15, according to the Comptroller and Auditor General (CAG).

In its report on the compliance of the FRBM Act during FY18 and FY19, the CAG said total liabilities at current exchange rate, computed on the basis of the Union Government Finance Accounts (UGFA) for FY18, were 44.76% of GDP. “However, after taking into account the understatement of public liability in accounts, and the liability on account of EBRs (extra-budgetary resources) listed in statement 27 of the Expenditure Budget 2019-20, total actual liabilities would be 49.82% of GDP,” it said.

A similar exercise for FY19 showed that actual liabilities were 49.82% of GDP, higher than the estimated central government debt of 44.92%.

The Centre undertook a clean-up drive of its books in the Budget for FY22, transferring certain below-the-line food subsidy to above-the-line and clearly showing extra-budgetary mop-ups, in a marked shift towards transparency in accounting.

The CAG also pointed out that even though in the revised FRBM framework, the central government debt and general government debt was to be contained at 40% and 60% of GDP, respectively, by the end of FY25, “no exercise has been undertaken to compute and disclose” this debt burden as per the changed definitions.

“In addition, no annual reduction targets for intervening years have been prescribed in the Act or advised by the government. In the context of general government debt, no strategy for containing debt at mandated levels in association with states, have been outlined in FRBM statements,” the report said.

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