Indian States' Off-Budget Borrowings Spark Calls for Transparency

Many Indian states are using opaque 'off-budget' borrowings via SPVs, bypassing fiscal scrutiny. An NIPFP economist highlights calls for a uniform disclosure framework, a key topic at a recent CAG meeting concerning the 16th Finance Commission.

Many Indian states are heavily relying on "off-budget" borrowings executed through Special Purpose Vehicles (SPVs) and state-owned entities. This opaque financial practice has triggered calls from policy experts for a standardised, uniform framework to ensure transparent disclosure and reporting.

Speaking with ANI, SK Md Azharuddin, an Economist at the National Institute of Public Finance and Policy (NIPFP), highlighted that these liabilities bypass traditional fiscal scrutiny because they are omitted from annual state budgets. "There are lots of states which are heavily dependent on off-budget borrowings," he said while speaking to ANI in an exclusive interview, adding that, "Lots of states are doing off-budget borrowings. It is borrowings that are not highlighted in that year's budget and it is through some SPVs or some state's own entity or some kind of special vehicles."

CAG Discusses Uniform Reporting Framework

Azharuddin said off-budget borrowings by states were among the key issues discussed during a meeting convened by the Comptroller and Auditor General (CAG) of India on Tuesday. The discussions focused on how such borrowings should be disclosed and reported by states, particularly in the context of the recommendations of the 16th Finance Commission.

"Today's discussion was on how the disclosures should be done following the 16th Finance Commission recommendations and how there could be a uniform way of reporting off-budget borrowings for the states," he said. Referring to the deliberations, he described the meeting as productive. "It went well. It was a fruitful discussion today," he said.

Fiscal Consolidation Efforts

Commenting on the broader fiscal landscape, Azharuddin said both the Centre and states are making efforts towards fiscal consolidation. "India is already trying to fiscally consolidate itself and states are also trying. They are reporting all those difficulties they are facing and the Centre, especially, is focusing a lot on fiscal consolidation. Hope we will reach fiscal consolidation," he said.

India's Economic Growth Potential

On the broader economy, the economist said India continues to have strong growth potential. "India has a huge potential to grow. India's demographic dividend is a major strength because of its young population. Apart from that, the Centre-state relationship is also very important and India is starting to do well in research and development," he said.

He said government initiatives aimed at promoting development and growth could help India in the future. (ANI)

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