Consider the following statements:
1.The Fiscal Responsibility and Budget Management (FRBM) Review Committee Report has recommended a debt to GDP ratio of 60% for the general (combined) government by 2023, comprising 40% for the Central Government and 20% for the State Governments.
2.The Central Government has domestic liabilities of 21% of GDP as compared to that of 49% of GDP of the State Governments.
3.As per the Constitution of India, it is mandatory for a State to take the Central Government’s consent for raising any loan if the former owes any outstanding liabilities to the latter.
Which of the statements given above is/are correct?
Explanation
The FRBM Review Committee Report 2017 had to figure in the exam!
Statement 1 is correct. That is the core recommendation.
Statement 2 is wrong as the numbers are interchanged (21% and 49% for States and Centre).
Statement 3 is technically correct.
The Constitution of India has adopted a federal system of polity and governance, originally envisaging a two-tier structure: Central (i.e., federal) Government and State (i.e., provincial) Governments. With the Constitution (73rd and 74th) Amendment Acts, 1992, Local Self-Government Institutions (LSGIs), i.e., rural and urban local bodies have been accorded constitutional status as the third-tier of Government. The Constitution provides for preparation of annual budgets and borrowings by the Centre, respectively, under Articles 112 and 292 and by the States under Articles 202 and 293.
Article 293 of the Indian Constitution imposes certain restrictions on the borrowings by State Governments. The Article stipulates that a State may not, without the consent of the Government of India, raise any borrowings if it has any loan outstanding, which is repayable to the Government of India.
Source: https://drive.google.com/file/d/1Sa6LstICASiTxMZyMivA-Y0mPt4WoKuZ/view
https://drive.google.com/file/d/1bHobt6cx1Zp8FsJtgD-ebSnzxTVKRrGS/view
Source: https://dea.gov.in/sites/default/files/Status%20Paper%20final%2028.3.18.pdf