Improving transparency: Efficient cash management can improve outcomes

Efficient cash management can improve outcomes

In a large country like India with a federal structure and decentralised governance, it is important that public financial resources are spent efficiently. If funds allocated to one scheme are not spent, they can be used for other purposes to improve economic outcomes. In 2021, the Government of India started the single nodal agency (SNA) system to enhance transparency and efficiency in the system. The Union government runs a number of centrally sponsored schemes (CCS), for which money used to be transferred to different accounts and often remained unused. But this changed with the introduction of the SNA to ensure a “Just-in-Time” release of money from both the central and state consolidated funds through an integrated network. According to one analysis, this has led to a significant consolidation of government accounts and integration of treasuries. Union Finance Minister Nirmala Sitharaman last week asked the Department of Expenditure and Controller General of Accounts (CGA) to ensure that SNA Sparsh is rolled out for all schemes in the next financial year.

 

She added the CGA should help states get on to the platform and convince them of the benefits. Most central schemes are already operated through this mode and the government is said to have saved over ₹11,000 crore since 2021-22. Making government spending more efficient has a variety of direct benefits. The system ensures timely availability of funds. Governments in India, the Union and the states, run fiscal deficits and depend on market borrowing. Unused money means governments would be paying interest on such funds without using it. Thus, there is merit in using tools to make cash management more efficient. Notably, the Union government for the first time in the latest Budget included a statement on the status of SNA accounts, which showed about ₹1 trillion from CCS is lying unspent in the accounts of states. Schemes like the Pradhan Mantri Awas Yojana (Gramin), Jal Jeevan Mission, Saksham Anganwadi and Poshan 2.0 Urban Rejuvenation Mission-500 Cities, and Swachh Bharat Mission (Urban) accounted for about 45 per cent of the unspent amount. For instance, not even half the ₹70,162 crore allocated for the Jal Jeevan Mission in 2024-25 could be spent. The allocation of CCS has been increased by 7.2 per cent in 2025-26 compared to revised estimates for this financial year.

 

The statement on SNA accounts itself shows how transparency can be improved. States often complain that adequate funds are not transferred. However, the SNA statement shows often the funds transferred are also not spent. It is possible that states have valid reasons why they could not use the funds allocated and it would be worth finding that out to improve outcomes. In the context of efficiency in government spending, it is also worth debating if there is a case for rationalising the number of CCS. Since states also have to commit resources, it is likely that they feel constrained and are prioritising expenditures that are more relevant for the local population. States have often argued, with convincing reasons, in favour of an untied flow of resources from the Centre, which gives them greater flexibility in designing programmes in accordance with the needs of the states. The Finance Commission, in this context, would do well to recommend an optimal balance.