Consider the following statements:

1. The Fiscal Responsibility and Budget Management (FRBM) Review Committee Report has recommended a debt-to-GDP ratio of 60% for the general (combined) government by 2023, comprising 40% for the Central Government and 20% for the State Government.
2. The Central Government has domestic liabilities of 21% of GDP as compared to that of 49% of GDP of the State Governments.
3. As per the Constitution of India, it is mandatory for a State to take the Central Government’s consent for raising any loan if the former owes any outstanding liabilities to the latter.

Which of the statements given above is/are correct?

1. 1 only
2. 2 and 3 only
3. 1 and 3 only
4. 1, 2 and 3

Explanation

Statement 1 is correct

• The FRBM Review Committee, led by N. K. Singh, recommended that the general (combined) government debt be reduced to 60% of GDP by 2023—comprising 40% for the Central Government and 20% for State Governments—to promote fiscal discipline and long-term sustainability.

Statement 2 is incorrect

• The Central Government has higher domestic liabilities, amounting to about 46% of GDP in 2016–17, while the liabilities of State Governments were around 23% of GDP.

Statement 3 is correct

• According to the Constitution of India, Article 293 addresses the matter of borrowing by State Governments. In clauses (3) and (4) of Article 293, it is stipulated that State Governments are required to seek the consent of the Central Government when seeking to raise new loans if they are already indebted to the Central Government. Consent from the Central Government may be granted, but it is subject to specific conditions.

Answer: (c) 1 and 3 only; Difficulty Level: Hard