Context:
A recent CAG (Comptroller and Auditor General of India) report highlights a sharp deterioration in the fiscal health of Indian states, with combined public debt tripling over the last 10 years, raising serious concerns about fiscal sustainability, governance efficiency, and long-term economic stability. The report also underscores the increasing adoption of digital tools, AI/ML, and remote auditing mechanisms to strengthen public financial management.
Key Highlights:
Public Debt Trends
- Combined public debt of 28 states increased from ₹17.57 lakh crore (2013–14) to ₹59.60 lakh crore (2022–23).
- Indicates rising fiscal stress due to higher borrowing, revenue-expenditure mismatch, and post-pandemic fiscal pressures.
Technological Interventions by CAG
- AI/ML-based forensic audits used to detect fraudulent beneficiaries in state welfare schemes.
- Plans to roll out remote audits across all government departments with digitised databases.
- Enables timely audits, wider coverage, and cost-effective oversight.
Digitisation & Public Financial Management
- Successful remote audits conducted in:
- GST
- Stamp & Registration
- e-Procurement
- Works Audit
- Direct Benefit Transfer (DBT) schemes
- Push towards 100% database-based GST and Income Tax audits.
Supporting Government Initiatives
- SNA SPARSH: Improves cash management and fund flow tracking.
- Special Assistance to States for Capital Investment:
- Encourages states to invest in IT infrastructure.
- Supports implementation of IFMS across departments.
Key Concepts Involved
- Public Debt: Total outstanding borrowings of a government.
- IFMS (Integrated Financial Management Information System): Digital platform for budgeting, accounting, treasury, and reporting.
- AI/ML: Used for pattern recognition, anomaly detection, and fraud identification in large datasets.
Relevant Prelims Points:
- Issue & Causes
- Rapid rise in revenue expenditure
- Increased borrowing post-COVID
- Limited own tax revenue of states
- Dependence on market loans
- Government Initiatives
- Digitisation of audits
- Remote auditing framework
- AI/ML-based forensic audits
- SNA SPARSH
- Special Assistance to States for Capital Investment
- Benefits
- Better fiscal transparency
- Reduced leakages in welfare schemes
- Improved cash and debt management
- Challenges
- Rising interest burden
- Data quality and cybersecurity risks
- Uneven digital capacity across states
- Impact
- Long-term fiscal sustainability concerns
- Need for responsible borrowing and reforms
Relevant Mains Points:
- Key Facts & Provisions
- States’ debt reached ₹59.60 lakh crore by 2022–23
- CAG’s constitutional role under Article 148
- Conceptual & Static Linkages
- Fiscal Responsibility and Budget Management (FRBM) framework
- Centre–State fiscal relations
- Public debt sustainability
- Keywords
- Fiscal stress, cooperative federalism, digital governance, forensic audit
- Way Forward
- Strengthen state revenue mobilisation
- Rationalise subsidies and revenue expenditure
- Expand technology-driven audits with strong data protection
- Improve fiscal transparency and accountability
- Encourage outcome-based budgeting and debt management strategies
UPSC Relevance (GS-wise):
- GS Paper 2: Governance, federalism, role of constitutional bodies (CAG)
- GS Paper 3: Public finance, fiscal policy, technology in governance, economic stability
- Prelims: Public debt, CAG, IFMS, AI/ML in governance