Public Financial Management, State Capacity, and Public Services in India

Abstract Despite well-funded and well-designed public programmes, service delivery often falls short of expectations. While existing research highlights various political economy challenges, this book uncovers a critical yet underexplored factor: the architecture of public finance, specifically expenditure management systems. Drawing on literature, field experience, and primary data from government officials and citizens, the book argues that India’s public financial management system has made good progress. However, persistent governance challenges, including float, corruption, fund delays for public programmes, poor auditing quality, and poor data availability for transparency to stakeholders remain. These challenges arise from two key problems: the fiscal and policy-level data across systems do not always speak to each other, and the data these systems produce aren’t available to those who need them. After expanding on such challenges, the book then proposes a set of transformations which, if implemented, has the potential to strengthen India’s public financial management system and enable better public service delivery. This approach seeks to provide real-time access to both funds and data on fund allocation, ensuring responsiveness to stakeholders’ needs. By redefining public finance beyond its traditional accounting and auditing role, the book presents a framework for expanding expenditure capacity and improving service delivery.