Incomplete records, siloed data systems weaken evidence base for State Finance Commissions: CEA Nageswaran

New Delhi [India], June 8 (ANI): Incomplete financial records, siloed data systems and varying accounting standards across states have weakened the evidence base available to State Finance Commissions (SFCs), Chief Economic Adviser to the Government of India V. Anantha Nageswaran said on Monday, stressing the need for reliable and timely data to strengthen fiscal decentralisation and improve local governance.
"Financial records are incomplete. Different departments hold information in silos that don't talk to each other. Accounting standards vary across states, making comparisons impossible. And successful Finance Commissions from the 13th to 16th have noted with increasing frustration that they cannot base their own recommendations on SFC reports because SFC reports themselves lack the evidence base they need," Nageswaran said.
He was speaking while launching a report on datasets for State Finance Commissions at an event organised by the Ministry of Panchayati Raj.
Describing the report as more than a routine publication, Nageswaran said it addresses issues that lie at the heart of governance at the grassroots level and have a direct bearing on the quality of public services delivered through panchayats.
He said while policymakers often focus on macroeconomic indicators such as monetary policy, fiscal deficits and the current account balance, the day-to-day experience of citizens in rural India is shaped primarily by local public services.
"When an ordinary person living in a village in India wakes up in the morning, what determines the quality of his or her day is not the repo rate or the current account balance. It is whether the tap has the water, whether the road outside the house is passable, whether the street light works, whether the Anganwadi is functional," he said.
According to Nageswaran, panchayats can deliver such services effectively only when they have the necessary funds, functions, authority and personnel. He said fiscal decentralisation is ultimately about bringing governance closer to people so that it meaningfully affects their lives.
The Chief Economic Adviser said State Finance Commissions are tasked with determining how resources should be distributed among local bodies based on factors such as infrastructure gaps, revenue capacity and developmental needs. To perform that role effectively, they require reliable and timely data at the level of individual gram panchayats.
Referring to the report, Nageswaran said it makes 12 recommendations aimed at improving the information architecture for local governance.
These include building time-series fiscal databases at the gram panchayat level, standardising accounting and reporting frameworks, strengthening capacity-building efforts, improving coordination among institutions and enhancing the availability of local-level data.
He particularly highlighted the recommendation that the Comptroller and Auditor General (CAG) of India be requested to conduct a performance audit of the implementation of the 73rd Constitutional Amendment, covering functional, financial and administrative devolution to panchayats.
"The honest question we must ask ourselves is how much of the constitutional promise has actually been fulfilled, " Nageswaran said, noting that in many cases functions have been devolved on paper without the corresponding funds, personnel or administrative support.
He said a systematic and independent assessment would help establish where states stand on devolution and create an evidence base for accountability. Strengthening data systems for State Finance Commissions, he added, is a key step towards improving governance quality, strengthening local institutions and enhancing ease of living in rural India.
During the event, Panchayati Raj Secretary Vivek Bharadwaj on Monday also told ANI that the said State Finance Commissions have faced challenges in functioning effectively due to the lack of reliable data needed for decisions on the devolution of funds among different tiers of government.
Speaking on the sidelines of the event, Bharadwaj said Finance Commissions play a key role in allocating resources among the Centre, states and local bodies, including municipalities and panchayats, which are responsible for delivering essential civic services such as drinking water, roads and education.
He said the Ministry of Panchayati Raj has developed databases and a data framework to support the functioning of State Finance Commissions and improve evidence-based resource allocation. Bharadwaj expressed hope that the initiative would strengthen fiscal federalism.
He also noted that the ministry recently received a Gold Award in the National e-Governance Awards for data analytics related to the Panchayat Advancement Index, which assesses around 2.5 lakh gram panchayats across 150 parameters. (ANI)