It pointed out that as part of the Group of 20, India has already committed to publishing general government fiscal information on a quarterly basis, which should enable better monitoring and faster policy reactions.
"As a complement, India will have to improve the collection and disclosure of information on public enterprises, especially at the state level, in order to better anticipate possible cases of financial distress and minimise their costs for taxpayers," the IMF said.
It noted that much of the discussion regarding fiscal policies in India focuses on its central and states' government deficits.
A broader and more relevant measure of the government's fiscal position - and its bearing on the economy - is the public sectors borrowing requirement, which has risen to about 8.5 per cent of GDP, according to IMF estimates.
"This estimate incorporates some information on central government expenditures, which are financed off-budget through other mechanisms, but is missing information on activities of state public enterprises and lower tiers of government," it said.
In India's case, household's net financial savings have been lower than the public sector borrowing requirement in recent years, the IMF said adding it implies that private investment projects face stiff competition for funding, making financing more costly and preventing potentially viable projects from being initiated.
According to the IMF report, the high borrowing requirement of the public sector also holds India back as it strives to catch up with more advanced countries by making private-sector investment more costly.
It suggested that in the coming years, "India should recommit to debt reduction by reducing its public sector borrowing requirement".
"Measures to enhance fiscal transparency and improve reporting will play a vital role in this process," the IMF pointed out.
Going forward, it suggested that the federal and state governments should look to provide the public with more user-friendly and forward-looking information and narratives and adopt common standards to ensure that citizens in all states have equal access to fiscal information.
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