Many Indian states are increasingly relying on "off-budget" borrowings conducted through Special Purpose Vehicles (SPVs) and state-owned enterprises, a practice that has raised concerns among policy experts who are calling for a standardized disclosure framework.
Hidden Liabilities Under Scrutiny
Speaking exclusively to ANI, SK Md Azharuddin, an economist at the National Institute of Public Finance and Policy (NIPFP), emphasized that these borrowings escape traditional fiscal oversight because they are not included in annual state budgets.
"There are lots of states which are heavily dependent on off-budget borrowings," Azharuddin said. "It is borrowings that are not highlighted in that year's budget and it is through some SPVs or some state's own entity or some kind of special vehicles."
CAG Meeting Focuses on Disclosure
Azharuddin noted that off-budget borrowings were a key topic during a meeting convened by the Comptroller and Auditor General (CAG) of India on Tuesday. The discussions centered on how such borrowings should be disclosed and reported by states, particularly in line with the recommendations of the 16th Finance Commission.
"Today's discussion was on how the disclosures should be done following the 16th Finance Commission recommendations and how there could be a uniform way of reporting off-budget borrowings for the states," he explained.
Describing the meeting as productive, Azharuddin said, "It went well. It was a fruitful discussion today."
Fiscal Consolidation Efforts
Commenting on the broader fiscal landscape, Azharuddin noted that both the central government and states are striving for fiscal consolidation. "India is already trying to fiscally consolidate itself and states are also trying. They are reporting all those difficulties they are facing and the Centre, especially, is focusing a lot on fiscal consolidation. Hope we will reach fiscal consolidation," he said.
India's Growth Potential
On the economy, the economist highlighted India's strong growth potential, citing its demographic dividend from a young population. He also stressed the importance of Centre-state relations and India's progress in research and development.
"India has a huge potential to grow. India's demographic dividend is a major strength because of its young population. Apart from that, the Centre-state relationship is also very important and India is starting to do well in research and development," Azharuddin said.
He added that government initiatives aimed at promoting development and growth could benefit India in the future.
