New Delhi: The Comptroller and Auditor General of India (CAG) has directed all states to adopt a uniform structure for classification of government expenditure by the fiscal year 2027-28. The move aims to overhaul the country’s public finance architecture and end decades of inconsistency in the way expenditures are recorded in the federal system, according to Jayant Sinha, Deputy CAG (Government Accounts).
The decision, which was communicated to the Union and state governments on November 11, brings uniformity to major expenditure — the most detailed level of the accounting hierarchy that classifies how each rupee of government expenditure is categorized. For years, states recorded these expenditures in different ways, making comparisons difficult, delaying data analysis and reducing the accuracy of budget estimates.
Sinha said the new standardized framework will enable uniform, transparent and comparable financial reporting for the first time.
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“The harmonization ‘resolves a decades-old problem’ and strengthens the foundations of public financial management. The list was finalized by a joint task force comprising officers of the Comptroller and Auditor General (CAG), state governments, the Comptroller General of Accounts and the Comptroller General of Defense Accounts. While states may retain unique spending procedures in sub-chapters, the basic structure will now be common across the country.”
The CAG has made another major reform by advancing the schedule for the preparation of monthly civic accounts. These accounts, which were earlier completed around the 25th of each month, will now have to be ready by the 10th.
Faster compilation of accounts will provide the state administration, RBI and other stakeholders with earlier insight into fiscal trends, which will aid budget planning and improve fiscal discipline.
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The CAG also rationalized the classification of mineral income in collaboration with the Ministry of Mines and the Ministry of Expenditure. The revised structure provides different royalty rates for coal and lignite, iron ore and non-ferrous minerals, along with clearer accounting for transfers to the National Mineral Exploration Trust and State Mineral Exploration Trust, he said. The changes are expected to improve the transparency of state finances, strengthen oversight of mineral revenues, and strengthen accountability in resource management.
Collaborations are ongoing
The CAG official further said that similar collaboration with other Union ministries is underway to streamline financial classification systems and improve the overall fiscal reporting framework. These initiatives form part of a broader strategy to improve public financial management across India, particularly at the state level, which accounts for a significant portion of public expenditure.
“The CAG’s move to introduce a uniform expenditure classification framework will bring long-overdue clarity and comparability to the way states record government expenditure, replacing decades of inconsistent accounting practices. This reform was required because vastly different heads of objects across states made it difficult to compare budgets, assess fiscal performance and analyze spending trends, resulting in gaps in policy planning and financial oversight at the Arrawatia Institute, Professor management and financial management from Arrawatia.
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“With the new system, the biggest beneficiaries will be the state government, Union government, RBI, finance commission and fiscal researchers as they will now have transparent, comparable and timely expenditure data for decision-making,” Sinha said.
