Q. Consider the following statements:
1.Article 293 of the Indian Constitution gives state governments the power to borrow money within India, using their own Consolidated Fund of the State as security.
2.Net Borrowing Ceiling (NBC) limit applies to all types of borrowing by the states.
3.The Fiscal Responsibility and Budget Management (FRBM) Act, 2003 set a target for the fiscal deficit to not exceed 2% of GDP for the central government.
Which of the statements given above are correct?
Explanations –
Statements 1 and 2 are correct. Article 293 of the Indian Constitution allows state governments to borrow money within India, using the Consolidated Fund of the State as security. This borrowing is subject to limits set by the state legislature, and in certain cases, the central government’s consent is required if the state owes money to the Centre. The Net Borrowing Ceiling (NBC) imposed by the central government applies to all types of borrowing by states, including loans from open markets, financial institutions, and liabilities from public accounts. It also extends to certain borrowings by state-owned enterprises.
Statement 3 is incorrect. The FRBM Act, 2003 set a target for the fiscal deficit to not exceed 3% of GDP. This target was aimed at achieving fiscal discipline and reducing deficits.
Source: The Hindu
