OFF BUDGET BORROWINGS

OFF BUDGET BORROWINGS

Subject : Economics

Context : According to the last Budget documents, in the current financial year the Centre was set to borrow Rs 5.36 lakh crore as off – budget borrowings.

Concept :

• Off-budget borrowings are loans that are taken not by the Centre directly, but by another public institution which borrows on the directions of the central government. Such borrowings are used to fulfil the government’s expenditure needs.
• But since the liability of the loan is not formally on the Centre, the loan is not included in the national fiscal deficit. This helps keep the country’s fiscal deficit within acceptable limits.
• Such borrowings are made by state-owned firms to fund government schemes but are not part of the official budget calculations.
• Off budget borrowing is excluded from the fiscal deficit calculations, but at the same time, are added to the total debt of the government.
• In recent years, several CPSUs have raised resources from the market by issuing Government of India-Fully Serviced Bonds (GoIFSB) for which the repayment of both principal and interest is to be done from the Budget.
• This means that though the borrowing is not a part of the consolidated fund of India, the interest payment for such borrowings are made out of the consolidated fund.
• Comptroller and Auditor General report of 2019 points out, this route of financing puts major sources of funds outside the control of Parliament despite it’s fiscal implications.