Question 1 · 10 marks · 157 words written
What do you mean by off-budget borrowings? Discuss the various issues associated with them.
Opening · a constitutional or legal provision
CAG and 15th Finance commission have red-flagged the issue of off-budget Borrowing and has asked the Government to put an end to it.
Body · points
OFF-BUDGET BORROWINGS :
These are the borrowings done by state run agencies to implement government policies and schemes, which is outside the traditional budgetary allocations done by the Government.
Issues related with them :-
Government usually opts for off-budget borrowing to keep it's fiscal deficit below 3% (FRBM Act) - This has issues like :-
(1) It evades the scrutiny of parliamentary channel (2) This puts extra pressure on the exchequer without being reflected in audits (3) Increases debt-to-GDP ratio (4) It creates a scope of mismanagement of public fund (5) Decreases transparency & accountability of the government (6) It highlights the loophole in fiscal management & the FRBM Act
Close · a way forward
Thus, in order to ensure Fiscal responsibility such routes must not be opted by government as it increases Public debt and creates fiscal mismanagement