<p style=”margin-bottom:13px”><span style=”font-size:11pt”><span style=”line-height:115%”><span style=”font-family:Calibri,sans-serif”><b>Syllabus Section: Economy</b></span></span></span></p>
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<p style=”margin-bottom:13px”><span style=”font-size:11pt”><span style=”line-height:115%”><span style=”font-family:Calibri,sans-serif”><b>Why in news?</b></span></span></span></p>
<p style=”margin-bottom:13px”><span style=”font-size:11pt”><span style=”line-height:115%”><span style=”font-family:Calibri,sans-serif”>This year, the focus of the budget will be on off-budget borrowings so as to reduce the Fiscal Deficit.</span></span></span></p>
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<p style=”margin-bottom:13px”><span style=”font-size:11pt”><span style=”line-height:115%”><span style=”font-family:Calibri,sans-serif”><b>About:</b></span></span></span></p>
<p style=”margin-bottom:13px”><span style=”font-size:11pt”><span style=”line-height:115%”><span style=”font-family:Calibri,sans-serif”>• Off-budget borrowings are loans that are taken not by the Centre directly, but by another public institution which borrows on the directions of the central government. Such borrowings are used to fulfil the government’s expenditure needs.</span></span></span></p>
<p style=”margin-bottom:13px”><span style=”font-size:11pt”><span style=”line-height:115%”><span style=”font-family:Calibri,sans-serif”>• But since the liability of the loan is not formally on the Centre, the loan is not included in the national fiscal deficit. This helps keep the country’s fiscal deficit within acceptable limits.</span></span></span></p>
<p style=”margin-bottom:13px”><span style=”font-size:11pt”><span style=”line-height:115%”><span style=”font-family:Calibri,sans-serif”>• Such off-budget financing is not part of the calculation of the fiscal indicators despite fiscal implications.</span></span></span></p>
<p style=”margin-bottom:13px”><span style=”font-size:11pt”><span style=”line-height:115%”><span style=”font-family:Calibri,sans-serif”><b>How are off-budget borrowings raised?</b></span></span></span></p>
<p style=”margin-bottom:13px”><span style=”font-size:11pt”><span style=”line-height:115%”><span style=”font-family:Calibri,sans-serif”>• The government can ask an implementing agency to raise the required funds from the market through loans or by issuing bonds.</span></span></span></p>
<p style=”margin-bottom:13px”><span style=”font-size:11pt”><span style=”line-height:115%”><span style=”font-family:Calibri,sans-serif”>• In the Budget presentation for 2020-21, the government paid only half the amount budgeted for the food subsidy bill to the Food Corporation of India. The shortfall was met through a loan from the National Small Savings Fund.</span></span></span></p>
<p style=”margin-bottom:13px”><span style=”font-size:11pt”><span style=”line-height:115%”><span style=”font-family:Calibri,sans-serif”>• The borrowings can also be raised through the Public Sector Banks (PSBs) where the PSBs can be asked to fund off-budget expenses. For example, loans from PSBs were utilized for meeting the shortfall in releasing the fertilizer subsidy</span></span></span></p>
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<p style=”margin-bottom:13px”><span style=”font-size:11pt”><span style=”line-height:115%”><span style=”font-family:Calibri,sans-serif”><b>Source: Indian Express</b></span></span></span></p>