Off-Budget Borrowings (Union Budget 2021)

Off-Budget Borrowings (Union Budget 2021)

The Union Budget 2021 will be presented by the Finance Minister, in which various measures related to reducing the fiscal deficit are likely to be presented. ‘Off-budget borrowings’ is also in the context of fiscal deficit.

Key points Off-Budget Borrowings (Union Budget 2021) :

  • Last year, the Comptroller and Auditor General of India (CAG), in its report, criticized the government for non-budget financing on the basis of figures for the financial year 2016-17.
  • He also said that due to this type of borrowing, there is a negative impact on future liabilities and increase in the cost of subsidy.
  • At the same time, in the budget estimates for the year 2019-20, the cost of subsidy was estimated to be 1.4% of GDP. Subsidies are expected to come down to 0.9% of GDP in the year 2022-23.
  • As a percentage of GDP, the cost of subsidy is expected to be 1% in the revised estimate for the year 2019-20 and 1% in the budget estimate for the year 2020-21.
  • Extra-budget spending has negatively impacted the growth rate and large scale changes are needed to increase productivity and competitiveness in all areas.
  • Since the liability of this loan is not formally vested with the Central Government. Because of this it is not included in the national fiscal deficit. This helps maintain the country’s fiscal deficit within an acceptable range.
  • Bond Issuance: The government may direct an implementing agency to raise the necessary funds from the market through loans or by issuing bonds.
  • Borrowing: Under this, the loan taken through public sector undertakings is used by the government. For example, public sector oil marketing companies were asked to pay for subsidized gas cylinders for the beneficiaries of the PM Ujjwala scheme.
  • Use of savings: For example, food subsidy is one of the main expenses of the center. In the budget presentation for 2020-21, the government paid half of the budget amount to the Food Corporation of India for the food subsidy bill. The shortfall was met through a loan from the National Small Savings Fund.
  • Bank Sources: Public sector banks are used to finance funds for off-budget expenses. For example, loans from public banks were used to reduce the issuance of fertilizer subsidies.

Off- budgetary borrowing:

  • ‘Off-budget borrowings’ are loans that are not taken directly by the Center, but by any other public institution on the instructions of the Central Government.
  • It is a way for the central government to finance its expenditure. It should not be included in the calculation of fiscal deficit, so it is not included in the budget expenditure. Such loans are used to meet the expenditure needs of the government.
  • According to the CAG report of the year 2019, this type of funding is the source of major sources of funds outside the control of Parliament. Which are as follows:

Source – The Hindu

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