Q. Consider the following statements with reference to the borrowing powers of the states in India:
1. States need to obtain the Centre’s consent to borrow, if the state is already indebted to the Centre.
2. The states cannot give the security of the Consolidated Fund of State for borrowing.
Which of the statements given above is/are correct?
Answer: A
Notes:
Exp) Option a is the correct answer
The constitution has provided for provisions for Union and State government to raise resources from borrowing.
Statement 1 is correct: A state cannot raise any loan without the consent of the Centre, if there is still outstanding any part of a loan made to the state by the Centre or in respect of which a guarantee has been given by the Centre.
Statement 2 is incorrect: A state government can borrow within India upon the security of the Consolidated Fund of the State or can give guarantees, but both within the limits fixed by the legislature of that state. Thus, both State and Union Governments have to give the security of their respective Consolidated Funds.
