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Authors: Manish Srivastava & Gautam Ravichander
"In 50 years, every street in London will be buried under nine feet of manure". The Times reported in 1894. At that time the city of London primarily commuted through horse carts and had 50000 horses that each produced 15-35 pounds of manure. This was a health nightmare for the city administration.
In 1834, Eugenio Barsanti and Felice Matteucci built the first gas-based internal combustion engine. By 1879, Carl Benz demonstrated his one-cylinder two-stroke unit built on a gas engine. By 1904, the UK was developing a motor vehicle act requiring drivers to have a license, enforcing speed limits, and penalties for reckless driving. Today, the number of registered vehicles across the world is nearing 1.5 billion. London has 2.5 million of these and the city is not covered in manure.
General purpose technologies like internal combustion engines provide a base foundation to accelerate innovation. A well-defined specification evolves around these general-purpose technologies enabling various actors to build interoperable components which can then be combined into various products to meet a variety of needs. Over time market actors compete in building better and cheaper parts with the confidence that it can work with the existing and new products.
However, this is not a blog about horses, manure and automobiles. This is about Public Finance Management.
Public Finance Management drives government and all development programs, be it through the development of public infrastructure, delivery of public services or direct benefits transfers. It does this by making the right amount of money available from various funding sources/agencies to the implementing agencies at the right time - in a fiscally sustainable and responsible manner. In order to do so, funding agencies need information from the implementation agencies on how the money is being spent. So, each flow of money from funding agencies is correlated with the flow of information from implementing agencies in the reverse direction.
Development programs are funded by various stakeholders - national governments, sub national governments, local governments, development bodies and various multi-lateral agencies. At a global scale, multi-laterals and bi-laterals fund a variety of development programs across countries. There are thousands of funding and implementing agencies across the world. Money and information needs to flow between agencies seamlessly for accelerated development - especially if we need to meet the sustainable development goals which has been set back due to the recent COVID pandemic and ongoing war.
In a manner of speaking, today's information flow is like the flow of commuters in horse carts in 19th-century London. Existing methods often lead to issues of poor quality and delays in the flow of information. This is the manure that clogs the information highways and impedes development. What is needed today is a general-purpose innovative technology like the internal combustion engine that can transform the flow of information in the public finance management space and unleash development.
We believe that fiscal information data standards equate to general-purpose technology. Fiscal information data standards can substantially increase the velocity and quality of PFM information flow - similar to how email standards (like SMTP, POP3, IMAP) help us exchange emails across the world. Fiscal Information Data standards can streamline the flow of information between funding and implementing agencies around the world. Through these standards, we can start modernising the world of PFM to bring about a more seamless and coordinated way of driving development around the world.
In the next blog, we will discuss how fiscal information exchange can start addressing some of the problems faced by all stakeholders in Public Finance Management.
Authors: Manish Srivastava and Prashanth Chandramouleeswaran
Over the last two decades, the evolving landscape of public financial management (PFM) has witnessed a remarkable transformation brought about by government agencies adopting technology to perform their duties. The State Finance Departments, through their Integrated Financial Management Information Systems/ Comprehensive Financial Management Systems (IFMIS/CFMS), have set the precedent for others to follow. These digital platforms have successfully harnessed vertical efficiency gains within government departments, leading to benefits in cash management, accounting, streamlining revenue, expenditure, and payments, and improved fiscal accountability.
As these systems become pervasive across the state a new aspiration for governance emerges: information exchange between government agencies across levels. The next wave of digital transformation hinges on the seamless exchange of data between different departments and government agencies, enabled by horizontal interoperability. The Finance Department, as the pioneer in this domain, is best positioned to anchor this transformation. The exchange of data between different government agencies holds immense potential with several key benefits such as:
Improved Coordination: Seamless data exchange fosters better coordination among various agencies, culminating in a truly unified "single window" experience for citizens and businesses. This integrated approach eliminates redundancies and enhances service delivery efficiency.
Enhanced Data Quality and Reuse: Efficient data sharing enables improved beneficiary identification and targeted benefit delivery. Agencies can collaboratively leverage data to ensure that government resources are directed precisely where they are needed, optimising social impact.
Strengthened Compliance Monitoring: Seamless data exchange empowers better compliance monitoring. Real-time access to accurate data enables authorities to make informed decisions and take prompt actions/ decisions.
Precise Revenue and Expenditure Forecasting: The exchange of timely and accurate data contributes to precise revenue and expenditure forecasting. This, when combined with Just-In-Time payments (JIT), promotes fiscal prudence and efficient resource allocation across all levels of government.
Government implementing agencies are engaged majorly in service delivery, infrastructure development, and benefits distribution. The initial surge of digital transformation within these agencies was propelled by the implementation of departmental systems, which facilitated data digitisation and the automation of departmental processes. As they approach the next phase of their digital evolution it is necessary to empower these agencies to truly deliver on the ‘One Government’ experience. This transformation can be realised sooner by fostering enhanced coordination and collaboration among these agencies, culminating in the realisation of a unified experience for citizens and businesses.
The potential for augmenting governance outcomes is significantly magnified through seamless information exchange. This is where a standardised information exchange layer assumes a pivotal role, propelling service and fiscal event information electronically across agencies and levels in a disaggregated, real-time manner. This reliable conduit ensures comprehensive and timely insights for all stakeholders throughout the PFM cycle. Figure 1 illustrates the possibilities of connecting line departments, parastatals and other agencies seamlessly, without the need for multiple point-to-point integrations. The benefits of the exchange layer across the three key activities are summarised below:
Empowering Service Delivery: Unlocking Revenue and Efficiency
The challenges in responsive and functional service delivery are multifaceted, but the pivotal challenge is that the flow of information between funding and implementing agencies is slow and limited. As government service delivery requires multiple actors and interactions to come together across different levels, the exchange of information is critical to bring down the cost of coordination and improve operational effectiveness. This includes real-time information on the financial health of a government agency/department- expenditure, revenue and availability of funds.
An information exchange layer can set the base for the electronic and real-time flow of standardised disaggregated data. For example, imagine a scenario where a government agency is looking to augment its revenue by addressing revenue leakages. The information exchange layer can allow relevant departments to share required data with each other to detect anomalies and plug in the leakages. This financial augmentation can, in turn, fuel service delivery improvements.
Accelerating Infrastructure Development: The Power of Real-time Intelligence
Infrastructure development, a cornerstone of progressive governance, can significantly benefit from the power of information exchange. Robust liability and expenditure management, accurate revenue and expenditure forecasts, and comprehensive program monitoring become attainable objectives through this transformative approach.
As an illustrative example, envision a Finance Department that forecasts expenditures with precision through a payments calendar, meticulously synced with real-time information. The approval of project estimates can trigger a synchronised chain of events, enabling optimal resource allocation and expeditious project execution. Visibility on liabilities at an early stage can also minimise sudden unplanned demand for large sums of money.
Citizen-Centric Benefits Delivery: Minimising Inclusion and Exclusion Errors
Benefits delivery, a critical dimension of government outreach, gains unprecedented precision through information exchange. An information exchange layer can bring data from multiple departments together to ascertain eligibility and minimise inclusion and exclusion errors. Incorporating such an exchange layer also has profound implications for migrant workers, for instance. Often, these individuals face challenges accessing benefits due to the transient nature of their work. With the information exchange layer in place, their data can be maintained centrally, enabling them to access benefits through PDS irrespective of their location, ensuring continuity in benefits, and safeguarding benefits against leakages while bolstering public trust in governance.
The Finance Department (FD) in states is uniquely poised to spearhead the implementation of an information exchange layer for two reasons:
Financial Steward of the State: As the custodian of the Comprehensive Financial Management System (CFMS) and the key institution in the financial landscape of the state, the FD plays a pivotal role in ensuring the optimal utilisation of public funds. This vantage point equips the FD to champion the establishment of an information exchange layer that can revolutionise the way information flows across agencies.
Linking Outlays to Outputs and Outcomes: Leveraging its comprehensive oversight, the FD can intricately map out the trajectory from budgetary allocations to tangible outcomes. This strategic insight equips the FD to provide invaluable inputs to various Line Departments, enabling them to align policy priorities, budgets, and execution seamlessly. Furthermore, this approach empowers the FD to offer ground-level perspectives before the commencement of the next budget cycle, fostering a dynamic and effective financial planning process.
Creating Value through Information Exchange: By orchestrating this transformation through a digital information exchange layer, the administrative burden of data collation, cleaning, and curation—currently borne by officials across ministries—can be substantially alleviated. This, in turn, equips these officials to channel their efforts into profound analysis and thoughtful policy recommendations.
Key Challenge to Address: While the concept of an information exchange layer holds immense promise, it is essential to address the key challenge associated with it – concerns about data visibility. Many stakeholders hesitate to adopt solutions due to concerns about information exposure. We have addressed this challenge through an architectural foundation of robust authorizations, access limitations, security protocols, privacy measures, and inherent authentications to ensure data can be accessed only by the stakeholders who it is meant for.
The FD’s role of financial stewardship provides an innate potential to implement the vision of an information exchange layer. As we navigate the next set of reforms in governance, the concept of information exchange has the prospect to be the catalyst to unlock unprecedented governance potential. It harmonises diverse government activities, nurtures fiscal prudence, and transforms service delivery. The journey ahead promises an environment where governance is not just digital, but also interconnected, efficient, and truly transformative.
Authors: Ritika Singh, MSC | Prashanth Chandramouleeswaran & Ameya Ashok Naik, eGov
How far would a dollar go if it went straight to someone in need, when they need it most? With government-to-person (G2P) payments, governments increasingly disburse welfare benefits directly to individuals or households. These high-volume, low-ticket-size G2P transactions are vital for boosting financial inclusion and empowering vulnerable communities. Globally, programs like Brazil’s Bolsa Familia and Zambia’s SWL report cost savings, leak reduction, and timely payments for grant recipients through digital payments. In India, financial inclusion has been boosted through Jan Dhan bank accounts, the use of Aadhar for identity verification, and mobile payments applications enabled by UPI, creating the possibility for government schemes to incorporate Direct Benefits Transfers (DBT).
While promising, digital G2P payments remain in their early stages, and face challenges like friction in payments, information gaps, and contextual barriers. The scheme, in the state of Odisha in India, is an example of multi-stakeholder collaboration to reengineer digital systems and government policies and processes to operationalise digitally-enabled Smart Contracting and Just-in-Time Funding Systems (JiT-FS). This has led to enhanced reach, improved observability, and a clear understanding of performance bottlenecks, empowering stakeholders to continuously refine and optimise the system.
is a pioneering initiative, designed to generate wage employment for vulnerable workers in urban Odisha during the COVID-19 pandemic. Rooted in community needs and responsive to local demands, MUKTA leverages existing Community Based Organizations (CBOs) to execute public works projects which are sustainable and climate resilient. These CBOs enlist wage seekers to work on these projects, generating income for the latter.
Delayed payments to CBOs and wage seekers were a key scheme implementation challenge. Beneficiaries faced lengthy wait times, with a baseline study across two pilot Urban Local Bodies (ULBs) finding that over 50% of completed tasks were not processed for payment, and the rest encountered delays exceeding one month. Wage seekers come from low-income households, and such delays undermine the scheme’s welfare objectives.
Such delays arise largely from cumbersome, paper-based compliances, billing, and verification processes. Every step – from attendance tracking and bill submission, to verification, approvals, and payment instructions – relied on manual processes. This increased the administrative burden on local government personnel, who are often already overburdened. These long-drawn processes also resulted in underutilisation of sanctioned funding, with funds parked idle in banks and limited transparency.
These challenges threatened to undermine MUKTA's goals. It was clear that a transformative intervention was required. To address these challenges, MUKTA embraced a three-phase "Smart Payment" approach:
Extensive consultations with stakeholders at each tier of government – Finance Department (FD), Housing and Urban Development (H&UD) Department, local government officials, and CBO representatives – helped identify key requirements for completing payments under the MUKTA scheme, and administrative inefficiencies that prevented timely completion.
Such schemes require multi-entity coordination: project definition, estimate creation, progress monitoring, and bill approval take place at the local government level; sanctioning overall fund tranches and executing electronic payments is done by the State government. A first step in the solution was identifying what information was needed for the State to disburse payments, and how it could be communicated most efficiently. Existing Integrated Financial Management System (IFMS) and Public Finance Management System (PFMS) data standards were leveraged to develop functional requirement specifications, leading to the development of a two-part solution: MUKTASoft, which streamlines processes and reporting by scheme implementers, and JiT-FS (Just-in-Time Funding System), which simplifies and speeds up fund disbursal.
MUKTASoft is a workfare scheme management platform, which streamlines project management and information flow among CBOs, local government bodies, H&UD, and FD. The expedited flow of standardised project information is key to reducing delays in payments. Key operational components of MUKTASoft include project finalisation, wage-seeker registration, digital attendance tracking, expense logging, and payment verification, all streamlined through user-friendly interfaces for different sets of users (CBO, ULB official, etc.)
Keeping in mind the administrative burden-related challenges identified, MUKTASoft was designed to improve overall efficiency of local and state government officials by:
Simplifying the process of project progress tracking and wage payment approval, aiming to move from over twelve steps (as identified in the baseline) to a simple three-step (maker-checker-approver) approach for each key document.
Enhancing visibility of project progress or delays in payments, ensuring that the responsible authority/ individual takes accountability for these, and enabling them to take steps to resolve these.
Enabling faster payments to wage seekers using smart payments through direct integration with the state IFMS
Aligning project management and scheme verifications sets the stage for integrating smart payments, utilising digital technologies such as JiT-FS for pull-based release of funds once project milestones are achieved. Core PFM principles like "single source of truth" (ensuring data accuracy), "observability" (real-time tracking of performance), and "minimising administrative burden" through smart contracts have been woven into the design of both MUKTASoft and JiT-FS, strengthening transparency, accountability, and efficiency.
The implementation phase required managing multiple dependencies. One of the fundamental challenges was building trust and reliability in the solution, to replace manual ways of working, by showcasing high success rates. The deployment timeline faced disruptions, and development hurdles were common initially – as is typical when new systems are integrating for the first time. Collaborative testing uncovered edge cases affecting transaction success rates, and a robust User Testing phase helped to validate various scenarios and user needs.
Checks and balances within MUKTASoft and the JiT module were introduced and implemented to address these emerging issues. For instance, at the project finalisation stage, MUKTASoft checks for availability of funds to cover the expenses of that project. This sanction validation establishes a spending ceiling before approval of projects or payments – a key control that the State Finance Department must maintain. Similarly, when payments are directly transferred to wage-seekers' bank accounts, each transaction's success or failure must be checked, and corrective measures taken where payments have failed to go through.
Local governments, while initially hesitant, saw that using MUKTASoft for project creation, estimate approval, and work orders had tangible benefits: reduced administrative burden, fewer delays, faster payments, and enhanced accountability. With clear demonstration of the value to all stakeholders, adoption of the solution became more universal.
Reduced delays: Digitising processes from attendance tracking to payment verification dramatically streamlined workflows, facilitating disbursement of payments to wage seekers and CBOs. Pilot data indicates around 60% reduction in payment disbursement time for wage seekers. Under the new system, beneficiaries are no longer waiting months to get paid, with most bills now being processed in a matter of days.
Enhanced efficiency: Automation freed up local government officials from administrative burdens, allowing them to focus on project management and monitoring, leading to improved project execution and resource utilisation.
Transparency and data-driven decision making: The integrated data platform enabled real-time tracking of project progress, expenditure, and beneficiary coverage, enhancing transparency and accountability for all stakeholders. For administrators, insights from real-time data facilitated informed decision-making, allowing for quicker identification and resolution of bottlenecks, and strategic allocation of constrained resources.
Empowering wage seekers: Timely wage payments and improved project execution under the Smart Payment system contributed to enhanced livelihood opportunities and overall well-being for urban communities.
With the pilot successful in 2 ULBs, the system is now being scaled to a total of 25 (out of 115) Urban Local Bodies (ULBs) in Odisha. MUKTA's journey offers valuable lessons for other G2P initiatives seeking to leverage technology for efficient PFM and inclusive development:
Existing infrastructure matters: Enrolment of wage seekers is simplified by using Aadhaar for identity verification. With Aadhaar in turn linked to Jan Dhan accounts, mapping of wage seekers to bank accounts is already in place. Widespread use of UPI addresses concerns around cash in / cash out. MUKTASoft and JIT-FS are a new wave of innovations, relying on building blocks provided by IndiaStack and related reforms.
Process streamlining is a key lever for any tech-enabled reform: When workflows are digitised, with automation and minimised manual intervention, the time and effort users have to spend on administrative tasks decreases, and they can focus on tasks that require human interaction or attention. At the same time, the reliability and timeliness of data improves, enabling administrators to better manage performance, and policy makers to develop data-driven plans and strategies.
Active and consistent collaboration: Strong partnerships between government, technology providers, and frontline users (including grassroots organisations) are essential for successful implementation. The solution will be used when stakeholders feel ownership over it, for which they should be involved throughout the process, with the needs they articulate being prioritised in product design.
Data fragmentation undermines progress at all stages: All stakeholders must accept a "single source of truth", which they contribute to by ensuring that all transactions take place through a single system of record. While some transition period may be needed to achieve this goal, even in this time, data should be updated in the system of record promptly, with appropriate verification / triangulation.
Adoption requires users to trust the new way of working: Adoption is not instant; extensive training and support is essential for overcoming initial resistance. As each set of stakeholders see the benefits from the new system, they will be more likely to use it, and to advocate for it with their peers. This can also be leveraged in periodic re-training, as trained resources move and new resources join the department.
Adaptability is essential: Unforeseen challenges are inevitable. Embracing flexibility and a willingness to find solutions are crucial for successful implementation.
By adopting these lessons and building upon MUKTA's success, other G2P programs can unlock the transformative potential of technology to deliver effective social safety nets and empower vulnerable communities across the globe.
The early success observed with smart payments for the MUKTA scheme underscores the transformative potential of technology in G2P transactions to reduce delays in service delivery and heighten public finance efficiency. It serves as a model for government agencies, prompting them to adopt Smart Payments as a catalyst for inclusive development.
Odisha's journey sets a model for an efficient and citizen-centric benefit delivery system, emphasising the need for adaptive strategies, collaborative partnerships, and a commitment to governance principles. Tailored to the local context, the solution can progress from basic Smart Payments, encompassing digital recording of conditional payments and compliances, to a medium level incorporating workflow management systems and APIs. The ultimate moonshot solution integrates AI/ML models, smart devices, and Internet-of-Things (IoT) to revolutionise the public finance landscape.
