Subsidies in India: Bridging the Data Gaps

Abstract

This paper looks at reported subsidy spending in India, in light of ongoing central initiatives to build transparency and accessibility of information related to financial operations and decisions of public expenditure. Subsidies have become a prominent policy tool for public resource allocation in India. However, without a clear definition and reporting of ‘subsidy’, the term tends to be loosely used to encompass many schemes and programs of the Union and state governments, including the recent rise in ‘freebies’, which need to be clearly differentiated. Moreover, many forms of financing through special securities and extra-budgetary resources have been used to finance subsidy spending, making it difficult to comprehensively define and measure subsidy expenditure in the budget and other annual accounts. These issues relate to the existence of data gaps in India’s fiscal reporting and accounts, which are a critical area of concern due to the large financial implications of subsidy expenditures. This paper identifies how subsidy spending has been accounted in India and explains the resultant data gaps that render such fiscal data inconsistent and incomparable across levels of government. The paper seeks to understand whether the present reporting of subsidy spending in the finance accounts and budget documents provide clear and comprehensive information about budget allocations, revenue sources, expenditures, and other related financial matters. It then proposes steps in the way forward to improve their transparency.