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States borrow 43% more, get deeper in debt

Topics Covered: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

States borrow 43% more, get deeper in debt:


Context:

Borrowing 43% more in first 9 months, states fall deeper into debt trap.

  • According to an analysis by rating agency ICRA, States had borrowed ₹3,87,400 crore in the first nine months of FY20.

Borrowing by States:

Borrowing by the Government of India and Borrowing by States are defined under Article 292 and 293 of Constitution of India respectively.

Article 293 of Constitution of India “Borrowing by States”:

  1. Subject to the provisions of this article, the executive power of a State extends to borrowing within the territory of India upon the security of the Consolidated Fund of the State within such limits, if any, as may from time to time be fixed by the Legislature of such State by law and to the giving of guarantees within such limits, if any, as may be so fixed.
  2. The Government of India may, subject to such conditions as may be laid down by or under any law made by Parliament, make loans to any State or, so long as any limits fixed under Article292 are not exceeded, give guarantees in respect of loans raised by any State, and any sums required for the purpose of making such loans shall be charged on the Consolidated Fund of India.
  3. A State may not without the consent of the Government of India raise any loan if there is still outstanding any part of a loan which has been made to the State by the Government of India or by its predecessor Government, or in respect of which a guarantee has been given by the Government of India or by its predecessor Government.

InstaLinks:

Prelims Link:

  1. Article 293 is related to?
  2. Do states need Centre’s permission to Borrow from markets?
  3. Finance Commission- composition.
  4. Functions of the Finance Commission.

Sources: the Hindu.