Question 1Explain and CommentGS3GS3

Explain the meaning of off-budget borrowings and its role in helping the government raise funds for various expenditures. Also, comment on its desirability.

Main Body

Off-budget borrowings are borrowings not undertaken by central directly rather via other governmental bodies like public sector enterprises PSEs. They are these not calculated as part of borrowings during budgeting. Role in raising government funds: 1. Borrowing from any channel helps meet fiscal deficit of government 2. Extra funds allow space for various social, welfare expenditures. 3. Since they are not part of budget calculations, do not create pressure of increasing loans. 4. Though the government has to pay interest on it, they by then need do not come under radar. Though it helps governments raise funds easily for welfare functions, these should not be come 'norm'. It is to be used as medicine not food. ICTH FC guidelines should be followed here.

14th Finance Commission recently in its relevant asked centre & states to disclose their off-budget borrowings. It is because of unfixed ability to: 1. Debt created, future liability in form of interest. 2. This is 'hidden' and opaque front of transparency & accountability 3. It is meant to shoot fiscal deficit limits under FRBM act 2003. 4. Does not show real economics stand. Though it helps governments raise funds easily for welfare functions, these should not be come 'norm'. It is to be used as medicine not food. ICTH FC guidelines should be followed here.

— Priyanka Choudhary · AIR 79

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Topper

Priyanka Choudhary

AIR 792021

Subject & Paper

GS3GS3

Topic

Economic Development

Government Budgeting

Off-budget borrowings

Writing Stats

218

Total words

Paragraphs

analytical

Tone

Linked PYQ

As a senior officer in the Ministry, you have access to important policy decisions and upcoming big announcements such as road construction projects before they are notified in the public domain. The Ministry is about to announce a mega road project for which the drawings are already in place. Sufficient care was taken by the planners to make use of the government land with the minimum land acquisition from private parties. The compensation rate for private parties was also finalized as per government rules. Care was also taken to minimize deforestation. Once the project is announced, it is expected that there will be a huge spurt in real estate prices in and around that area. Meanwhile, the Minister concerned insists that you realign the road in such a way that it comes closer to his 20-acre farmhouse. He also suggests that he would facilitate the purchase of a big plot of land in your wife’s name at the prevailing rate which is very nominal, in and around the proposed mega road project. He also tries to convince you by saying that there is no harm in it as he is buying the land legally. He even promises to supplement your savings in case you do not have sufficient funds to buy the land. However, by the act of realignment, a lot of agricultural lands has to be acquired, thereby causing a considerable financial burden on the government, and also the displacement of the farmers. As if this is not enough, it will involve cutting down of a large number of trees denuding the area of its green cover. Faced with this situation, what will you do? Critically examine various conflicts of interest and explain what your responsibilities are as a public servant.

20M2018Critically examine