Borrowing by States – UPSC Prelims

States need Centre’s permission before borrowing.

Article 293(3) of the Constitution states that “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 guarantee has been given by the Government of India or its predecessor Government”.

Article 293(4) says that the “consent under clause (3) may be granted subject to such conditions as the Government of India may think fit to impose”.

Since, every single state is currently indebted to the Centre and thus, all of them require the Centre’s consent in order to borrow.