OFF BUDGET BORROWINGS
WHY IN NEWS ?
- The Union Government wants to ‘pre-pay’ the remaining off-budget borrowings of Rs 170,000 crore over a reasonable period of time.
ABOUT OFF BUDGET BORROWINGS:
- The off-budget borrowings are loans that government does not take directly, but public institutions borrow after the Centre’s order.
- These borrowings are intended to fulfill the government’s expenditure needs
- Off budget financing also known as ‘extra’ budget borrowing is used by the Centre to finance its expenditures while keeping the debt off from its annual statement.
- Such borrowings are not counted in the calculation of the fiscal deficit.These borrowings are intended to fulfill the government’s expenditure needs.
- Since the Centre is not directly borrowing the money, therefore, the liability of the loan is not formally on the Centre.
- As a result, it is not included in the fiscal deficit book. Governments across the world use this to escape budget controls.
HOW CENTRE RAISES OFF BUDGET BORROWINGS:
- The government can ask an implementing agency to raise the required funds from the market through loans or by issuing bonds.
- For example, Oil marketing companies, like IOCL, HPCL and BPCL extended unsecured and interest-free loans to Pradhan Mantri Ujjwala Yojana beneficiaries on account of first refill or cost of gas of stove.
USES OF OFF BUDGET BORROWINGS:
- Several budgets announced schemes are financed out of extra budget borrowings.
- These borrowings are done by the public sector entities that are administering the schemes. In the past, schemes like the Pradhan Mantri Krishi Sinchayee Yojana (PMKSY), Deen Dayal Upadhayay Gram Jyoti Yojana (DDUGJY), Swachh Bharat Mission (SBM), Pradhan Mantri Awas Yojana (PMAY), etc were financed out of extra budget borrowings.
SYLLABUS: PRELIMS, INDIAN ECONOMY
