Union Budget 2021-22: On 1 February, Union Finance Minister Nirmala Sitharaman will present the budget of the financial year 2021-22. This will be the third budget of the second term of the Modi government. This budget has become very important due to Corona epidemic and subsequent economic crisis. In the budget, announcements and provisions to strengthen the economy will be made along with the expenditure incurred by the government in the next financial year. It is very important to know the meaning of some of its words before the budget. One such word is off-budget borrowing. Most people do not know its meaning. Let’s know the meaning of off budget burrowing in easy language.
Meaning of off-budget borrowing
Off budget, borrowing is related to fiscal deficit. Therefore, it is important to know its meaning first. A fiscal or fiscal deficit is the difference between government spending and earnings. When the revenue that the government receives is low and expenses are high, then this situation is called fiscal or fiscal deficit. The financial status of any government is also known by this number. Rating agencies within and outside the country monitor this. Therefore, the government tries to keep the fiscal deficit low. One way to reduce financial losses is off-budget burrowing.
Off budget borrowing are loans that the central government does not take directly. Rather, some other public institution i.e. public institution takes this loan at the behest of the government. Such loans help in meeting the expenses of the government. But because the liability or liability of this loan does not formally go to the central government, such a loan is not included in the fiscal deficit of the country. And this helps the government to reduce the country’s fiscal deficit.
How does the government borrow off-budget?
The government can ask any agency to raise funds from the market. This can be done by issuing loans or bonds. For example, the food subsidy is one of the major expenses of the central government. In the budget of 2020-21, the government paid only half of the subsidy bill to the Food Corporation of India. The remaining amount was met through a loan from the National Savings Fund. Due to this, the central government had to reduce its food subsidy bill from 1,51,000 crore to pay only 77,892 crore.
Other public sector undertakings i.e. public sector undertaking have also taken loans for the government. For example, before this, the beneficiaries of Pradhan Mantri Ujjwala Yojana have been asked to pay public sector oil marketing companies for subsidized gas cylinders. Public sector banks are also used for funds. For example, loans from these banks were used to reduce fertilizer subsidies.