Context:

In order to restrict the fiscal deficit to a respectable number, “off-budget borrowing” is the easiest resort for the government.

‘Off-Budget Borrowings’

• Off-budget borrowings are loans that are taken not by the Centre directly, but by another public institution that borrows in the direction of the central government.
• Such borrowings are used to fulfil the government’s expenditure needs.
• But since the liability of the loan is not formally on the Centre, the loan is not included in the budgeted fiscal deficit.
• This helps keep the country’s fiscal deficit within acceptable limits.

Off-budget borrowings raised

• Implementing agencies: The government can ask an implementing agency to raise the required funds from the market through loans or by issuing bonds.
• Other PSUs: Other public sector undertakings have also borrowed from the government.  PSBs: Public sector banks are also used to fund off-budget expenses.

CAG Report, 2019

• A Comptroller and Auditor General report of 2019 points out, this route of financing puts major sources of funds outside the control of Parliament.
• Such off-budget financing is not part of the calculation of the fiscal indicators despite fiscal implications.