| Consider the following statements regarding the borrowing powers of the Union and the States. |
| 1. The Union Government has unlimited powers to borrow from anywhere and for any amount. |
| 2. State Governments can borrow from outside India, but only with the permission of the centre. |
| 3. State Governments have unlimited powers to borrow from inside India. |
| Which of the statements) given above is/are correct? |
A) Only 1
B) 1 and 2
C) 2 and 3
D) None of these
Correct Answer: D
Solution :
[d] Statement 1 is incorrect, since such a power has been given to the Union Government according to Article 292 of the Constitution. The limits to this power though can be specified by The Parliament. Statement 2 is incorrect because the Constitution does not allow State Governments to borrow from outside India under any circumstances. Even when an international loan is assigned to the states, it is taken in the name of the Union Government. Statement 3 is also incorrect because even the power of state Governments to borrow from inside India is restricted under certain circumstances. When the Union government has any loan outstanding from a state then that state can make any additional borrowing from elsewhere only after the permission of the Union Government. The right answer is thus [d].
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