Part XII: Finance, Property, Contracts and Suits

Article 293: Borrowing by States

Original Article:

(1) Subject to the provisions of this article, the executive power of a State extends to borrowing within the territory of India upon the security of the Consolidated Fund of the State within such limits, if any, as may from time to time be fixed by the Legislature of such State by law and to the giving of guarantees within such limits, if any, as may be so fixed.

(2) The Government of India may, subject to such conditions as may be laid down by or under any law made by Parliament, make loans to any State or, so long as any limits fixed under article 292 are not exceeded, give guarantees in respect of loans raised by any State, and any sums required for the purpose of making such loans shall be charged on the Consolidated Fund of India.

(3) A State may not without the consent of the Government of India raise any loan if there is still outstanding any part of a loan which has been made to the State by the Government of India or by its predecessor Government, or in respect of which a guarantee has been given by the Government of India or by its predecessor Government.

(4) A consent under clause (3) may be granted subject to such conditions, if any, as the Government of India may think fit to impose.

Explanations:

Article 293 ensures States can access borrowing within a framework that balances financial autonomy with fiscal discipline. The Union’s role in overseeing borrowing safeguards against unsustainable State debt.

Key Provisions:

Clause 1: State Borrowing Powers

States can borrow within India against their Consolidated Fund, with limits set by their legislatures, ensuring fiscal responsibility.

Clause 2: Union Loans and Guarantees

The Union can provide loans and guarantees to States, helping them meet financial needs under Parliamentary oversight.

Clause 3: Consent Requirement

States must obtain Union consent for new borrowing if they have existing loans or guarantees provided by the Union.

Clause 4: Conditional Approvals

The Union may impose conditions when granting consent, ensuring borrowing aligns with national fiscal policies.

Real-Life Examples:

States often borrow for major infrastructure projects, such as Tamil Nadu’s metro expansion, with Union support ensuring fiscal sustainability.

Amendments:

Although Article 293 itself has not been amended, related fiscal policies like the Finance Commission’s recommendations shape its implementation.

Historical Significance:

Article 293 reflects India’s federal ethos, balancing State autonomy with the Union’s role in managing national fiscal stability.

Debates and Deliberations:

In the Constituent Assembly, members debated balancing State borrowing autonomy with Union oversight:

• Shri M. Ananthasayanam Ayyangar emphasized Parliamentary limits on State borrowing to prevent excessive debt accumulation.
• Dr. B.R. Ambedkar supported executive discretion within limits set by Parliament, ensuring flexibility for State financial needs.
• Shri H.V. Kamath proposed stricter Parliamentary control over borrowing purposes, especially for loans with political implications.
• Discussions included proposals for allowing States to borrow only for developmental purposes, ensuring fiscal responsibility.

References:

• Constitution of India: Full text and analysis of Article 293.
• Finance Commission Reports: Recommendations on State borrowing.
• Constituent Assembly Debates: Insights on fiscal responsibility and State borrowing.