Off-budget borrowing

• Off-budget borrowings (or Extra budgetary resources- EBRs) are loans that are taken not by the Centre directly, but by public sector undertakings on the directions of the central government.


• Since the liability of the loan is not formally on the Centre, the loan is not included in the fiscal deficit (FD).

• Such borrowings are a way for the Centre to finance its expenditures while keeping the debt off the books.

• As FD is the most important metric to understand the financial health of government and is keenly watched by rating agencies, EBR allows government to keep FD in acceptable limits.

• However, as such borrowing is not the part of Consolidated Fund of India (CFI) they remain beyond the control of Parliament even though the interest on such loan is paid from CFI.

• Also, Comptroller and Auditor General (CAG) in 2019 has flagged following concerns on EBRs.

• Current quantum of such borrowings “is huge”

• Current policy framework “lacks transparent disclosures and management strategy” for comprehensively managing such borrowings.

• The central government is shying away from making full disclosures.


Mains Paper 3: Economy

Prelims level: Off-budget borrowing

Mains level: About Off-budget borrowing and how the process done in India

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