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Loans raise Telangana’s hackles | Hyderabad News

Even as Telangana accuses Centre of being discriminatory in granting permissions for monthly borrowings and rues that it has missed three bidding dates to raise Rs 15,000 crore in 2022-23 first quarter, a lot of haggling is going on over loans. Sribala Vadlapatla explains about loans, FRBM rules, etc.
What is the need for a loan?
Governments require funds to execute projects and schemes. Each year, there is a difference in the budget between revenue and expenditure. Borrowing is to make up the difference.
Why are Fiscal Responsibility Budget and Management rules put in place?
In the budget, the difference between income and expenditure is referred to as fiscal deficit. It represents the fiscal year’s deficit, whereas the outstanding government liabilities represent all of the liabilities up to that point. FRBM’s purpose is to maintain healthy economic parameters and discipline in taking loans and thereby minimise the fiscal deficit. FRBM rules require four fiscal indicators — revenue deficit, fiscal deficit, tax to GDP ratio and total outstanding debt — of the states not to exceed a certain fixed percentage of the state’s total GDP.
When was FRBM first introduced?
FRBM was first enacted in 2003. Following the global financial crisis, a new set of rules was implemented in 2017 and 2018. The Centre provided an additional window for the states to raise loans. Who pays for these loans? Where are they recorded?
The Centre allows the states to borrow within the country. In the budget document, it is reflected in the fiscal deficit.
Who is responsible for off-budget loans?
These are loans taken on the government’s behalf by another public institution such as a state-owned corporation. Such borrowings are used to meet the spending needs. The government guarantees the bank, but the loan is not included in the state’s fiscal deficit and budget document because the liability is not formally on the state. Then, there are the loans that these corporations take out with government guarantees and that are repaid by the state government itself.

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