"I believe that we must move towards accrual accounting system. We have to move cautiously and adopt a step-by-step approach," Mr Chidambaram said at a workshop on Government accounting reforms in India, organised by the Rajya Sabha secretariat.

Currently, the government ministries and departments are adopting a cash-based accounting system, which, accounting experts say, has many drawbacks.

The Finance Minister noted that the Controller General of Accounts has embarked on pilot projects on accrual-based accounting system in the Urban Development and Health ministries.

The Railways has also initiated steps to move to accrual-based accounting, he said.