Part XII: Finance, Property, Contracts and Suits

Article 292: Borrowing by the Government of India

Original Article:

Article 292 empowers the Union government to borrow against the Consolidated Fund of India within limits set by Parliament. It also allows guarantees to be issued under similar constraints.

Explanations:

Article 292 ensures that the borrowing powers of the Union are exercised with responsibility and under Parliamentary oversight. This framework protects against excessive public debt while allowing flexibility for fiscal planning.

Key Provisions:

Clause 1: Borrowing Against Consolidated Fund

The Union may borrow money secured by the Consolidated Fund of India, but within limits set by Parliament.

Clause 2: Issuing Guarantees

The government may issue guarantees under Parliamentary limits, ensuring fiscal discipline even for indirect liabilities.

Real-Life Examples:

The government frequently borrows funds to finance infrastructure projects, such as highways and railways, under the borrowing limits prescribed by Parliament.

Amendments:

Though the article remains unamended, the Fiscal Responsibility and Budget Management (FRBM) Act, 2003, complements it by imposing statutory borrowing limits and fiscal targets.

Historical Significance:

Article 292 was modeled after British fiscal practices and reflects a commitment to responsible debt management. It underscores the importance of balancing flexibility and accountability in public finance.

Debates and Deliberations:

Constituent Assembly members, including Dr. B.R. Ambedkar, emphasized the need for Parliamentary oversight on borrowing to prevent fiscal mismanagement. The following key points emerged:

• Shri M. Ananthasayanam Ayyangar highlighted the need for the Finance Commission to monitor borrowing policies, ensuring projects funded by loans do not burden current revenues unnecessarily.
• Shri H.V. Kamath expressed concerns over executive discretion in borrowing, especially regarding foreign loans. He called for Parliamentary scrutiny on both the amounts and purposes of borrowing.
• Dr. B.R. Ambedkar assured that Parliament’s power to prescribe borrowing limits would prevent fiscal irresponsibility, emphasizing the necessity of executive flexibility.
• Suggestions to limit borrowing to developmental activities were discussed but left for future Parliaments to legislate as needed.

References:

• Constitution of India: Full text and analysis of Article 292.
• FRBM Act, 2003: Framework for responsible fiscal policy.
• Constituent Assembly Debates: Insights on fiscal responsibilities and borrowing limits.