The Comptroller and Auditor General (CAG) has mandated that all states adopt a uniform accounting framework starting FY28, marking one of the most significant overhauls of India’s public finance reporting in decades. The notification, issued on November 11, seeks to eliminate inconsistencies in how states classify key expenditure and revenue items, enabling more reliable fiscal comparisons across governments.
New framework for states
Under the new framework, states must follow a common list of Object Heads — the granular classifications used to record components of expenditure such as salaries, allowances, and grants. Currently, wide variations in reporting practices make fiscal analysis difficult. Some states list salaries as plain emoluments, while others combine them with medical reimbursements or travel allowances. Grant-in-aid classification also varies despite uniformity in major heads.
“States currently follow widely divergent classifications, limiting the ability of policymakers, researchers and legislatures to compare fiscal performance across states or with the Union government,” Deputy CAG Jayant Sinha said. The reform, he added, addresses a “decades-long issue” and will improve clarity and transparency in public expenditure reporting.
The CAG has also advanced timelines for the compilation of Monthly Civil Accounts, a key tool for tracking state fiscal performance. While states were earlier required to submit accounts by the 25th of the following month, nearly ten states now report by the 10th and another eight by the 15th.
“Timely availability of this data will strengthen fiscal discipline and support decision-making for state governments, the Reserve Bank of India, and MoSPI,” Sinha noted. Quicker availability of spending and revenue information will also help analysts identify fiscal stress with shorter lags.
Mineral revenues
A third major reform focuses on tightening the reporting of mineral receipts. The CAG has rolled out a revised structure that distinguishes royalties from coal, lignite, iron ore and non-ferrous minerals, and separately identifies contributions to the National Mineral Exploration Trust (NMET) and State Mineral Exploration Trust (SMET).
According to Sinha, ring-fencing mineral funds and standardising revenue classification will help ensure that “mineral wealth contributes equitably to long-term economic development of the States and the country.”
The new accounting reforms — spanning expenditure, monthly reporting and natural-resource revenue — collectively aim to bring the states’ fiscal systems on par with modern public-finance standards, improving comparability, transparency and long-term fiscal governance.
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