Subsidies are a prominent tool of public expenditure and fiscal reporting. As per the Union Budget 2025, the central government and state government combined reported subsidy is 3% of GDP. However, there is no clear definition of the subsidy leading it to being loosely used to refer to many central and state government schemes. A recent study by the Centre for Social and Economic Progress titled “Bridging the Data Gaps in India: The Case of Subsidy Spending," highlighted inconsistencies in the framing of subsidy, as well as financing and reporting.

The study authored by Shruti Gupta, Radha Malani and Anoop Singh points out that the term “subsidy” lacks a uniform definition, ambiguity and inconsistency over the inclusion of tax rebates, implicit subsidies and in-kind transfers. For example- Tamil Nadu and Punjab both run free bus ride schemes for women. However, while Tamil Nadu reports this spending in its subsidy statement, Punjab does not. Significant subsidies were omitted due to extra-budgetary resources. Special banking arrangements for fertilizer companies comprise extra-budgetary resources, as assessed by the CAG. However, these are not accounted for in the reported fertilizer subsidy.

Another critical issue pointed out by the study is the inconsistency in fiscal data, making it difficult to compare subsidy spending across different levels of government. Similarly, there is no standardized framework for cross-state or central-state comparisons. While some states categorize cooking oil subsidies under food subsidies, others put it in the category of “subsidy for women's development”. Current reporting practices in finance accounts and budget documents fail to provide a clear and comprehensive picture of budget allocations, revenue sources, and expenditures related to subsidies.

The study emphasizes the urgent need for the reformation of the PFM framework and provides an institutional definition of subsidy, potentially under national Public Financial Management Law. The center should try to improve fiscal transparency to all levels of government. The centre should make all off-budget financing in subsidy statements and reflect the total subsidy burden within a fiscal year.

The report also mentions that the extent of the data gap is such extravagant that the study itself understates the subsidy spending.  “Addressing the data gaps is crucial due to substantial financial implications of subsidy expenditure in India” stated the report.

India's performance on fiscal reporting and transparency is well below the standard of G20 economies. This leaves policymakers with incomplete data to ground their budgetary and economic decision-making. India’s subsidy bill is substantial. It needs to use data strategically to eliminate inefficient policies. At the recent G20 summit, India importantly affirmed that “data for development” will be integral to its presidency.