Q. With reference to the Off budget financing, consider the following statements:
Select the correct answer using the codes given below:
Q. With reference to the Off budget financing, consider the following statements:
Select the correct answer using the codes given below:
The correct option is A 1 only
Explanation:
Statement 1 is correct: Off-budget financing also known as 'extra' budget borrowing is used by the Centre to finance its expenditures while keeping the debt off from its annual statement.
Statement 2 is incorrect: Off-budget borrowings are loans that the government does not take directly, but public institutions borrow after the Centre's order. These borrowings are intended to fulfill the government's expenditure needs.
Statement 3 is incorrect: Such borrowings are not counted in the calculation of the fiscal deficit. Since the Centre is not directly borrowing the money, therefore, the liability of the loan is not formally on the Centre. As a result, it is not included in the fiscal deficit book. Governments across the world use this to escape budget controls. In India, off-budget financing is also excluded from the Fiscal Responsibility and Budget Management (FRBM) Act, which intends to bring transparency and accountability to the monetary actions of the government. FRBM Act sets a target for the Centre to establish fiscal discipline, strengthen fiscal prudence, and reduce its fiscal deficits.
Explanation:
Statement 1 is correct: Off-budget financing also known as 'extra' budget borrowing is used by the Centre to finance its expenditures while keeping the debt off from its annual statement.
Statement 2 is incorrect: Off-budget borrowings are loans that the government does not take directly, but public institutions borrow after the Centre's order. These borrowings are intended to fulfill the government's expenditure needs.
Statement 3 is incorrect: Such borrowings are not counted in the calculation of the fiscal deficit. Since the Centre is not directly borrowing the money, therefore, the liability of the loan is not formally on the Centre. As a result, it is not included in the fiscal deficit book. Governments across the world use this to escape budget controls. In India, off-budget financing is also excluded from the Fiscal Responsibility and Budget Management (FRBM) Act, which intends to bring transparency and accountability to the monetary actions of the government. FRBM Act sets a target for the Centre to establish fiscal discipline, strengthen fiscal prudence, and reduce its fiscal deficits.
