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Improving transparency: Efficient cash management can improve outcomes

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Efficient Public Financial Management in India

The effective management of public financial resources is crucial for a large federal country like India. Efficient spending ensures that funds are utilized optimally to improve economic outcomes.

Introduction of the Single Nodal Agency (SNA) System

  • The Indian government introduced the Single Nodal Agency (SNA) system in 2021 to enhance transparency and efficiency.
  • The SNA system ensures a “Just-in-Time” release of funds from central and state consolidated funds, utilizing an integrated network.
  • This system addresses issues of unspent funds in centrally sponsored schemes (CCS) by consolidating government accounts and integrating treasuries.

Impact of the SNA System

  • Finance Minister Nirmala Sitharaman emphasized rolling out SNA Sparsh for all schemes in the next financial year, highlighting its benefits to states.
  • The SNA system has reportedly saved the government over ₹11,000 crore since its inception in 2021-22.
  • It ensures timely availability of funds, reducing fiscal deficits and unnecessary interest payments on unused funds.
  • The Union Budget included, for the first time, a statement on the status of SNA accounts, revealing about ₹1 trillion from CCS lying unspent in state accounts.

Challenges and Recommendations

  • Despite funds being transferred, they often remain unspent, indicating a need for understanding state-level challenges.
  • There is a potential case for rationalizing the number of CCS to align them better with state priorities.
  • States advocate for an untied flow of resources from the Centre for greater flexibility in program design.
  • The Finance Commission could recommend an optimal balance in resource allocation.
  • Tags :
  • Single Nodal Agency (SNA) System
  • Public Financial Management
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