Government Borrowings

Choose the Correct Answer

Correct Answer : Option d

Explanation
Statement 1 is not correct: Off-budget borrowings are loans raised by public sector undertakings or special purpose vehicles on behalf of the government.
These borrowings are not shown in the official fiscal deficit figure in the annual budget.These borrowings are kept outside the conventional fiscal deficit calculations so they do not increase the fiscal deficit.
However, Comptroller and Auditor General (CAG) and Finance Ministry reports recommended that these should ideally be included in fiscal deficit calculations to reflect the true fiscal position of the government.

Statement 2 is not correct: State governments have used off-budget borrowings, often by using state-owned enterprises to raise loans backed by government guarantees. This practice has been flagged by the Comptroller and Auditor General (CAG) and the 15th Finance Commission, particularly when such liabilities are not transparently disclosed in the budget.
In fact, the Union Government in 2022 capped off-budget borrowings of states and began including them under the net borrowing ceiling.