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Can state government borrow money on its own?

The short answer is yes but with certain terms and conditions. Please read below to understand under what conditions state government can borrrow money on its own

Article 293 in The Constitution Of India 1949293. Borrowing by States

(1) Subject to the provisions of this article, the executive power of a State extends to borrowing within the territory of India upon the security of the Consolidated Fund of the State within such limits, if any, as may from time to time be fixed by the Legislature of such State by law and to the giving of guarantees within such limits, if any, as may be so fixed

(2) The Government of India may, subject to such conditions as may be laid down by or under any law made by Parliament, make loans to any State or, so long as any limits fixed under Article 292 are not exceeded, give guarantees in respect of loans raised by any State, and any sums required for the purpose of making such loans shall be charged on the Consolidated Fund of India

 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 a guarantee has been given by the Government of India or by its predecessor Government(

4) A consent under clause ( 3 ) may be granted subject to such conditions, if any, as the Government of India may think fit to impose CHAPTER III PROPERTY, CONTRACTS, RIGHTS, LIABILITIES, OBLIGATIONS AND SUITS4

As per report in Mint in India ,

  • The 41st meeting of the GST Council was stormy, a departure from its normal consensual way of decision-making, as the Centre and state governments wrangled over how the compensation to states needs to be paid

Fund crunched states could borrow from the Reserve Bank of India (RBI) to cover their shortfall in goods and services tax (GST) collection, with the federal indirect tax body, the GST Council, on Thursday agreeing that states’ revenue losses needed to be compensated.

While the consensus in the Council was that states’ revenue shortfall is to be met, the modalities for doing so witnessed clashes, with opposition-ruled states expressing disappointment about having to borrow from RBI rather than getting an upfront payment from the Centre.

To repay the borrowings, the cess levied on purchases of items such as cars, aerated drinks and tobacco will be extended beyond 2022, when the levy was supposed to expire, according to the current norms.

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