Fortifying the foundations of a nation’s financial fabric is the cornerstone for forming a resilient economy.

In the pursuit of transforming India into a developed nation, Viksit Bharat, effective government accounting and public finance management are very crucial. As the engine driving socio-economic progress, effective fiscal management plays a pivotal role in shaping India’s trajectory towards prosperity. Prudent resource allocation, efficient fund utilization, and transparent financial reporting are key drivers of national economic progress.

Within this framework, the development of Smart Cities and rural regions through over 2.62 lakh Panchayati Raj Institutions and more than 4500 Urban Local Bodies (ULBs) is vital for comprehensive advancement and inclusive growth. Investment in urban and local infrastructure not only enhances the quality of life for citizens but also fosters economic growth and competitiveness on a global scale. Moreover, ensuring equitable distribution of resources and channelizing investments towards sustainable development initiatives, will pave way for a more equitable and prosperous future for all, thereby assisting in realising the targets goals envisioned under Sustainable Development Goals (SDGs).

Globally many Countries are also embracing transparency measures like adoption of the International Public Sector Accounting Standards (IPSAS) issued by IPSAS Board. Till now 49 IPSASs have been issued including 1 cash based IPSAS to facilitate transitioning from cash to accrual accounting system. As per a report released by the International Federation of Accountants (IFAC) in the year 2021, out of 165 jurisdictions covered in the report, 30% of the jurisdictions are following cash-based accounting, 40% are making the transition from cash to accrual and rest 30% have switched to accrual based accounting. Further, 28 jurisdictions out of total 49 jurisdictions that moved to accrual system are either converge to/ using modified IPSAS or developed their own standards based on IPSAS. It is forecasted that by 2025, 50% of jurisdictions will report on an accrual basis which will certainly be a great achievement. It is further estimated that by 2030, 73% jurisdictions will follow accrual system. Further, amongst the rising significance of sustainability concerns and its inclusion in the nation’s development strategy, IPSASB has initiated developing International Public Sector Sustainability Reporting Standards.

It is understood that effective public finance management is essential for fostering economic growth and ensuring societal well-being. Maintaining fiscal discipline and debt sustainability encourages private investment, driving economic prosperity. Efficient resource allocation guarantees equitable access to quality services, benefiting all citizens. Prioritized infrastructure investments stimulate economic activity, enhancing connectivity and competitiveness. Robust financial controls, transparent accounting practices, and accountability mechanisms optimize decision-making and efficiency gains.

Overall, adept management of public finances creates an environment conducive to sustainable development and prosperity for communities, which will be vital for developing future cities, financing the public infrastructure and support the rising urbanisation. The same is equally true for India too.

India has exemplified its commitment through robust reforms aimed at fortifying governmental accounting policies and public finance management. Recognizing the pivotal role of Panchayati Raj Institutions (PRIs) and Urban Local Bodies (ULBs) in driving national economic growth, these bodies have been empowered through various policies and schemes, to ensure equitable and inclusive development, particularly in rural areas where 65% of our population resides.

India has implemented a range of reforms to bolster efficiency and spur economic growth, including the Fiscal Responsibility and Budget Management (FRBM) Act of 2003, which aimed at fostering fiscal discipline and transparency, public expenditure reforms and enhancements in debt management and revenue mobilization further promote inclusive growth and fiscal sustainability. To further enhance transparency and accountability, the Government Accounting Standards Advisory Board (GASAB), and the ICAI are formulating accounting standards tailored to the needs of Central & State governments and local bodies.

In order to provide a stronger impetus to adoption of accrual accounting, the Ministry of Housing and Urban Affairs (MoHUA), Government of India, acting on the recommendations of the 15th Central Finance Commission, has made the submission of audited annual accounts an entry-level criterion for accessing basic grants. The definition of “audited annual accounts” covers Balance Sheet, Income and Expenditure Statement, and Cash Flow Statement, for which accrual accounting is a prerequisite.

The Institute understands the significance of Public Finance Management and Government Accounting in the economic landscape and its vast potential in the developmental aspects and is working on these aspects through a dedicated Committee constituted in 2005.

The ICAI not only assists governments at both Central and State levels in implementing accounting reforms and enhancing public financial management, but also contributes to building citizen-centric governance models and driving organizational support for accounting reforms, by fostering collaboration, cooperation, and capacity development, thereby contributing to India’s journey of transformation and inclusive development. In this direction, the Institute has undertaken significant initiatives in driving the reforms in Government Accounting and Public Finance like:

• ICAI supported Local bodies and Government entities in adopting of Accrual Accounting in Indian Railways, Department of Post, Accounting Reforms in Municipal Corporations in Delhi, Kolkata & others, Development of Standard Operating Procedure (SOP) document for monetisation of assets of Weavers’ Cooperative Societies under Liquidation for Department of Handlooms of Government of Tamil Nadu.
  
  
• ICAI has issued 31 Accounting Standards for Local Bodies (ASLBs) including one Cash based ASLB to facilitate transitioning from cash to accrual accounting system.
  
  
• Roadmap for phased implementation of ASLBs in Municipal Bodies has been submitted to the Ministry of Housing & Urban Development (MoHUA) for recommending the same to the State Governments.
  
  
• ASLB 2 (Cash Flow Statements), ASLB 5 (Borrowing Costs) and Guidance Note on “Accounting for Investments for Local Bodies” have been mandated by the ICAI to comply with by Members of ICAI while Auditing the Financial Statements of Urban Local Bodies (ULBs) w.e.f. 1st April 2022 as these are conceptually similar to NMAM.
  
  
• State of Uttarakhand has set a precedent by revising its Municipal Accounts Manual referring ASLBs issued by ICAI.
  
  
• Introduced a Certificate Course on Public Finance & Government Accounting for capacity building of members and government & institutional officials.
  
  
• To augment accounting and reporting at grass root level Certificate Courses for Accountants of Panchayats and Municipal bodies has been launched under an MoU entered between the Office of C&AG and ICAI.
  
  
• ICAI is providing technical support to the Ministry of Housing and Urban Affairs (MoHUA) to transform the quality of financial reporting of ULBs in India. Draft framework is being laid out for quality assessment of Audited and Unaudited Annual Accounts of ULBs being uploaded on Cityfinance.
  
  
• With NITI Aayog, ICAI has conducted study on Transition to Accrual Accounting: Models and learnings for Urban Local Bodies.
  
  
• Strengthening Governance at grass root level, ICAI joined hands with various State Government/ ULBs to provide training to officials in vernacular language on latest accounting tools and practices including accrual accounting namely Urban Development Directorate, Uttarakhand, Directorate of Municipal Administration, Maharashtra and Nagaland and Department of Rural Development, Ahmedabad.
  
  

As India aims for inclusive and sustainable development, new avenues of funding are required, such as Municipal Bonds and Green Finance. India envisions a future where urban development is not only efficient and technologically advanced but also environmentally conscious and inclusive. Further, the vision of self-reliance will push for development of public infrastructure, Smart Cities to meet aspirations of all, and make India competitive globally.

Our profession has a pivotal role in realisation of this vision, by collaborating and working with government and its institutions in enabling accounting reforms in Panchayati Raj Institutions, where in implementation of standards even the Cash-based will reap in huge benefits. Similarly, with rising aspirations, urbanisation is an expanding phenomenon and to support this growth story financial reforms will be required in ULBs funding like Municipal Bonds to make them self-sustainable. This will necessitate effective fund management and financial reporting to attract investments and build trust. The opportunity is huge, and I believe it’s time for the government to consider having Chartered Accountants across the financial functions in PRIs and ULBs to get them ready for the future, with their specialized knowledge & skills.

ICAI aims and aspires to empower governments to effectively manage resources, drive sustainable growth, develop next level public infrastructure and improve the lives of citizens by embracing technology, nurturing talent, and promoting transparency. Through innovation, and adaptive regulation, ICAI will strive for a future where financial systems are Resilient, Accountable, and Responsive to the evolving needs of society.

Together, we stand as partners in shaping a prosperous and equitable future, where sound financial management serves as a catalyst for inclusive development and national progress.

The strength of a tree is known by the strength of its roots and the more you add humus to the soil, the more nutritious fruits a tree will bear. Our vision of Viksit Bharat is not only confined to make India a 30 trillion Dollar economy but also strengthen the financial reporting framework within the nation by starting from the grass root level and going up in the pyramid to the apex level. The profession of Chartered Accountancy is purpose-driven, and our significance lies in building an economy that is resilient in the wake of global uncertainties. Driven by rapid economic growth, surge in domestic demand and strong growth projections for the coming years the vision of Viksit Bharat by 2047 is gaining momentum and as partners in nation building, ICAI strives to work in the same direction.

As envisioned in the words of Former President Shri A.P.J Abdul Kalam “To succeed in your mission, you must have single-minded devotion to your goal.” Let us harness our expertise, creativity, and innovation to empower marginalized communities, promote sustainable development, and pave the way for a brighter future for our country India.