An Analysis of Off-Budget Borrowings by Indian Governments and their Legal Context

Abstract

India has a long-standing problem of data gaps, which have serious implications for fiscal policy and economic growth. The lack of transparency around off-budget borrowing is a major example of data gaps in India, and has been persistent across the union and state levels. This paper examines the regulatory framework and institutional gaps surrounding off-budget borrowings in India. It attempts to build a comprehensive understanding of the methods used for such borrowings and ascertains their true extent. The paper relies primarily on data from the CAG audits of the union and state finance accounts. It welcomes the Union’s recent actions to make transparent and begin to do away with the use of off-budget borrowings. However, the Union and States need to take more action to close this form of data gap. Meanwhile, the Union should ensure the full reporting of these borrowings. This calls for an improvement in the coverage, timeliness, quality and integrity of fiscal reporting, in line with international standards. Eventually, that could be best achieved with a comprehensive and consolidated Public Financial Management (PFM) law for the Union and the States.