The restrictions imposed under Article 293 of the Constitution on State borrowing powers, though constitutionally valid, may hinder fiscal autonomy of States and disrupt cooperative federalism. Discuss in the light of recent developments. (Answer in 250 words)

Article 293 of Constitution puts limits on Borrowing powers of the State by prohibiting States from borrowing from international institutions and seek approval from centre in case of outstanding liabilities. Rationale Defined Restrictions: - (1) To avoid indiscriminate borrowing by states impact national economy - (2) To inculcate fiscal discipline - (3) Fixed financial accountability - (4) Post-independence need of the hour due to limited resources with centre

Impact on Fiscal Autonomy of States: - (1) Restrict borrowing powers needed for undertaking developmental needs - (2) Assumes that borrowing is bad as an outdated philosophy against Golden Rule of Borrowing - (3) Funds needed during exigencies and hoarded during emergency problem amidst crises (to Relief for Kerala Jandahides demanded exceptional funds) Impact on Cooperative Federalism: - (1) Goes against fiscal federalism as states are powerless - (2) Federalism as basic doctrine under SR Dommat Case - (3) Trades states as subordinate due to clause & seeking approval - (4) Allow centre to borrow from international market creates powers to centre centralizing tendencies WAY FORWARD: - (1) Expert committee to screen the relevance of article 293 - (2) Inter-state council to dwell on disruptions with respect to borrowing capabilities - (3) State-level legislation to comply with FRBM Act fiscal accountability - (4) Finance Commission Grants (Article 275) grants to meet exigencies Though there is need for greater financial autonomy to states, there should be adequate safeguards to ensure clear sustainability amidst stying towards Road: Culture