State Government Borrowing under Article 293

State governments can borrow money, but Article 293 places constitutional limits on this power. It restricts where states may borrow, permits statutory borrowing limits, and requires Union government consent when specified outstanding loan obligations exist.

Territorial and legislative limits

Under Article 293(1), a state's executive power extends to borrowing within India upon the security of its Consolidated Fund, subject to the other provisions of the Article.

• States may borrow only within the territory of India under this provision; it does not authorise them to borrow directly abroad.
• Borrowing must remain within any limits fixed from time to time by the state legislature through law.
• The state's power to give guarantees is also subject to any limits fixed by its legislature through law. Borrowing and guarantees are distinct commitments, and the provision addresses both.

When Union consent becomes compulsory

Article 293(3) makes Union consent necessary where a specified loan remains outstanding. Either of the following circumstances activates this restriction:

• Any part of a loan made to the state by the Government of India, or its predecessor government, remains outstanding.
• Any part of a loan for which the Government of India, or its predecessor government, has given a guarantee remains outstanding.
• Once this condition applies, the state cannot raise any loan without Union consent. The restriction is not confined to obtaining another loan from the Union.

Conditional consent and Union lending

Under Article 293(4), the Government of India may attach such conditions as it thinks fit when granting consent under clause (3). This creates a constitutional basis for Union oversight of borrowing by states covered by that clause.

• Article 293(2) also authorises the Union to lend to states, subject to conditions laid down by or under parliamentary law, and to guarantee state loans within the applicable Union borrowing limits.
• Article 293 does not itself prescribe a fixed numerical borrowing ceiling for every state; it provides for legislative limits and conditional Union consent.
• Union consent is therefore not an unconditional requirement for every state loan. Its necessity under clause (3) depends on the specified outstanding obligations.