A pathway to smart public spending and optimum use of public funds

• by Allina Tiwari, Anant Jayant Natu, Ritika Singh and Vikram Sharma
• Jul 16, 2025
• 6 min

Our blog explores how India’s SNA-SPARSH module of PFMS makes fund flow smarter. Learn how the new SNA-SPARSH, when layered with a rule-based program management system, can serve as a way forward to reduce idle funds and improve public service delivery.

Every year, governments allocate vast sums of money toward social welfare, infrastructure, and development programs. However, despite these efforts, some funds remain unspent or underutilized due to operational challenges, fragmented systems, and limited administrative capacity for timely disbursal.

These idle funds, also called float, lie unused in program accounts and incur interest cost as part of the government’s borrowing. They reflect a significant opportunity for governments to further strengthen public financial management (PFM). As India steps into an age of digital governance and fiscal transparency, we see strong momentum and readiness to enhance the efficiency and effectiveness of public fund use. The country is well-positioned to address these long-standing inefficiencies and unleash the full potential of public spending.

In the past, audit reports and union budgets have highlighted issues, such as delays in disbursals, manual processing bottlenecks, underutilization of allocated budgets, and accumulation of idle funds. The Union Budgets, in the past, through Statement 4A have been reporting unspent funds under Centrally Sponsored Schemes (CSS). [1]

For instance, the unutilized funds in FY 2022-23 amounted to about USD 1.7 billion and USD 2.0 billion in FY 2023-24, based on the difference between actual expenditure and revised estimates.[2] However, for the first time, the Union Budget 2025–26 brought attention to this issue by releasing Statement 4AA, which publicly revealed a program-wise breakdown of unspent funds in State Single Nodal Agency (SNA) accounts.

A new era of transparency: Statement 4AA

Statement 4AA represents a milestone in public finance transparency and intends to achieve optimal expenditure management. It revealed the total funds released for select CSSs and the unspent balances with designated SNAs or state treasuries as of 31^st December 2024. This disclosure applies to programs with annual budget estimates of over USD 55 million.

Each program presents three key figures: The total release made by the center, the amount parked with SNAs, and the balance with state and union territory governments. This framework enables policymakers, administrators, and citizens to track public funds, from release to potential utilization, and identify where float accumulates in the system.

This kind of public accounting is critical because CSS accounts for nearly 10% (USD 63 billion out of a USD 590 billion budget per FY 2025-26) of India’s total government expenditure. Even a modest share of these funds can create large-scale inefficiencies. Delayed disbursals stall implementation of critical welfare services, while parked funds contribute to an avoidable interest burden for the exchequer.

Modern systems, but a long road ahead

In July 2021, the Government of India introduced the SNA model to address the issue of idle balances. Under this system, each state manages a CSS through one designated agency with a single bank account, which ensures better control and visibility over fund flow and improved cash flow management. The Public Financial Management System (PFMS) enforces drawing limits, links fund release to actual utilization, and has saved approximately USD 1.3 billion in interest costs by reducing float since FY22.

While the SNA model has driven significant progress, it has room to strengthen fund use timelines further across states. By December 2024, state governments had more than USD 18 billion in unspent balances. This balance accounts for roughly 10% of net borrowings in the Budget FY 2024-25. While project implementation often begins, disbursements are delayed due to slow approvals, manual processing, and verification issues. The gap between expenditure and actual progress highlights the need for faster, digital, and rule-based payments.

What leads to idle float?

Idle funds persist due to several key recurring factors. First, many departments continue to depend on semi-digital program management systems. Unstandardized data formats and the absence of an integrated, unified data source hinder smooth data exchange and payment validation. This may cause delays between work completion, payment processes, and final disbursement. As a result, even after tasks are completed, funds remain stuck in the treasury or transit.

Second, a disconnect between budget plans, spending capacity, and reporting leads to underutilized funds, even as yearly allocations increase. This may reflect a need for more dynamic alignment between budget projections and implementation capacity to optimize fund deployment.

Third, agencies earmark funds for operational activities, such as training or monitoring, which they spend gradually. This explains part of the float but does not account for the broader systemic delays.

The road ahead: A better model for the flow of funds

In January 2024, the Government of India launched SNA-SPARSH (System for Payments and Reporting Across Sectors Holistically) to upgrade the existing SNA model. This new system introduces a real-time or just-in-time (JIT) method of funding. The SNA-SPARSH module in PFMS makes fund flow more transparent, helps release money faster, and reduces idle funds by allowing both the Centre and States to pull funds. It also shows how funds are shared and tracks how money is used in real time.

Some CSSs have already implemented SNA-SPARSH. For example, the state of Rajasthan adopted it for the Pradhan Mantri Gram Sadak Yojana (PMGSY), a program with one of the highest unspent funds worth around USD 1 billion nationally, as per Statement 4AA. With this new model, fund transfers are expected to align more closely with implementation milestones.

While the upgraded system enhances oversight and fund tracking, the next frontier is to translate this improved visibility into consistent, time-bound actions. The new SNA-SPARSH module of PFMS, layered with a rule-based program management system, can fill this gap. It can transform government payments from near-just-in-time (JIT) to true JIT payments.

Such module will enable agile processes and rule-based triggers to uncover the full benefits of PFM reforms, enhance monitoring, and ensure more timely payments.

From oversight to real-time action

The way ahead involves the use of an intelligent, rule-based program management system- one that operates on clear “if-then-else” logic to deploy autonomous triggers based on predefined milestones and compliance conditions. An innovative, rule-based payment system that is embedded in PFM principles, such as observability, JIT funding, and a single source of truth, can improve expenditure management and overall fiscal efficiency.

Such a system would improve cash flow, reduce administrative work, and give officials more control over spending. It can also help with better planning, budgets, and expenditure management, which would lead to improved accountability at both the central and state levels. Over time, the program management system would support better fund use and tracking across CSS programs, enhancing administrative capacity. It also supports a more transparent and results-driven public finance system.

The model has already shown promising results. In 2019, MSC designed the “smart payments solution” piloted under the MUKTA (Mukhya Mantri Karma Tatpar Abhiyan) program in Odisha across 115 urban local bodies (ULBs). This allows instant payments once verified milestones are achieved. An impact evaluation in January 2024 reported that pilot ULBs (Jatni and Dhenkanal) reduced payment delays by 57% and eliminated float in the pilot ULBs. The system used autonomous, rule-based processing to reduce administrative burden and ensure faster, more accountable delivery.

The Department of Food and Public Distribution uses the SCAN portal (Subsidy Claim Application for NFSA) to enable smart payments. SCAN offers a single window through which to settle food procurement claims from states. It uses rule-based checks and automatic calculations to release subsidies on time. These efforts show a move toward real-time financial management. Digital systems and rule-based triggers now help ensure funds move only when and where needed.

What next?

India’s recent public financial reforms have delivered results through their shift from static fund allocations to dynamic, milestone-linked disbursements. The introduction of SNA-SPARSH, built on JIT principles, marks a key milestone in the government’s commitment to reduce idle balances, improve transparency, and enable real-time fund tracking.

SNA-SPARSH’s transformative potential can blossom. But it must be paired with an end-to-end smart governance layer that digitizes and automates the full program management and payment lifecycle based on predefined rules-driven triggers. Such a pairing would pave the path to more innovative and responsive public finance.

[1] Centrally Sponsored Schemes (CSS) are programs funded by the central government but implemented by states. These schemes cover a wide range of sectors, including health, education, and rural employment.

[2] The conversion from INR to USD is based on the exchange rates at the time of writing.