Part XII - Finance & Property • Article

Article 292 Simplified: Borrowing by the Government of India

Article 292 empowers the Central Government (Union executive) to borrow money (both inside India and from foreign sources) using the Consolidated Fund of India as collateral. However, this borrowing power is subject to any debt limits set by Parliament by law.

Official Text

The executive power of the Union extends to borrowing upon the security of the Consolidated Fund of India within such limits, if any, as may from time to time be fixed by Parliament by law and to the giving of guarantees within such limits, if any, as may be so fixed.

Simple Meaning

Explain Like Ten

The central government can borrow money (like taking a loan from a bank or selling savings bonds) to build roads or run the country. The government's giant savings bank (Consolidated Fund) acts as proof that it can pay the money back.

Student Mode

Article 292 outlines the borrowing powers of the Union executive. It authorizes the Government of India to borrow money upon the security of the Consolidated Fund of India, and to give financial guarantees, within limits fixed by Parliament by law. In practice, this is regulated through statutory frameworks like the Fiscal Responsibility and Budget Management (FRBM) Act, 2003, which checks national debt levels.

Example

The Government of India borrows money by issuing Treasury Bills (T-Bills) or government bonds to the public and banks, or by taking loans from the World Bank. The security for these loans is the Consolidated Fund of India. Parliament regulates this through legislation like the FRBM (Fiscal Responsibility and Budget Management) Act, which sets limits on fiscal deficits and debt.

Key Takeaway

The Union Government can borrow money and give financial guarantees using the country's Consolidated Fund as security, within limits set by Parliament.

FAQs

Can the Central Government borrow from foreign countries?

Yes. The Union's borrowing power under Article 292 extends to both domestic and international borrowing.

What is the main law in India that sets borrowing limits for the government?

The Fiscal Responsibility and Budget Management (FRBM) Act, 2003, which mandates target limits for fiscal deficits and public debt.

Quiz

Under Article 292, the Union Government borrows money upon the security of:

Answer: Consolidated Fund of India

Who has the authority to fix limits on the borrowing power of the Union Government?

Answer: Parliament by law