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With reference to Off Budget Borrowings in India, consider the following statements:
- It is counted in the calculation of the fiscal deficit.
- Off-budget borrowings are loans that are taken by the Centre directly.
- This route of financing puts major sources of funds outside the control of Parliament.
Which of the statements given above is/are correct?
- a)1 and 2 only
- b)2 and 3 only
- c)3 only
- d)1, 2 and 3
Correct answer is option 'C'. Can you explain this answer?
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With reference to Off Budget Borrowings in India, consider the followi...
- Statement 1 is incorrect: One of the most sought-after details in any Union Budget is the level of fiscal deficit. It is essentially the gap between what the central government spends and what it earns. In other words, it is the level of borrowings by the Union government. One of the ways to do this is by resorting to “off-budget borrowings”. Such borrowings are a way for the Centre to finance its expenditures while keeping the debt off the books — so that it is not counted in the calculation of fiscal deficit.
- Statement 2 is incorrect: 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.
- Statement 3 is correct: As a result, as a Comptroller and Auditor General report of 2019 points out, this route of financing puts major sources of funds outside the control of Parliament. “Such off-budget financing is not part of the calculation of the fiscal indicators despite fiscal implications,” said the report.
- News: One of the most sought-after details in any Union Budget is the level of fiscal deficit. As such, it is keenly watched by rating agencies — both inside and outside the country. One of the ways to do this is by resorting to “off-budget borrowings”.
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With reference to Off Budget Borrowings in India, consider the followi...
Off Budget Borrowings in India:
Off-budget borrowings refer to funds raised by the government that are not included in the annual budget.
Correct Statement:
- Statement 3: Off-budget borrowings put major sources of funds outside the control of Parliament. This is true because these borrowings are not subject to the same oversight and scrutiny as the regular budget and can be used by the government without parliamentary approval.
Incorrect Statements:
- Statement 1: Off-budget borrowings are not counted in the calculation of the fiscal deficit. This is incorrect as these borrowings do impact the overall fiscal deficit of the government.
- Statement 2: Off-budget borrowings are not necessarily loans taken by the Centre directly. They can also include borrowings by government agencies or entities that are not part of the regular budget.
Conclusion:
Therefore, option C is the correct answer as only statement 3 is accurate in describing off-budget borrowings in India.
Off-budget borrowings refer to funds raised by the government that are not included in the annual budget.
Correct Statement:
- Statement 3: Off-budget borrowings put major sources of funds outside the control of Parliament. This is true because these borrowings are not subject to the same oversight and scrutiny as the regular budget and can be used by the government without parliamentary approval.
Incorrect Statements:
- Statement 1: Off-budget borrowings are not counted in the calculation of the fiscal deficit. This is incorrect as these borrowings do impact the overall fiscal deficit of the government.
- Statement 2: Off-budget borrowings are not necessarily loans taken by the Centre directly. They can also include borrowings by government agencies or entities that are not part of the regular budget.
Conclusion:
Therefore, option C is the correct answer as only statement 3 is accurate in describing off-budget borrowings in India.
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With reference to Off Budget Borrowings in India, consider the following statements: It is counted in the calculation of the fiscal deficit. Off-budget borrowings are loans that are taken by the Centre directly. This route of financing puts major sources of funds outside the control of Parliament.Which of the statements given above is/are correct?a)1 and 2 onlyb)2 and 3 onlyc)3 onlyd)1, 2 and 3Correct answer is option 'C'. Can you explain this answer?
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