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Question

States can borrow from within India if :

This question was previously asked in
MH SET 2020 Paper 2 Philosophy Question Paper (27-Dec-2020)
The correct answer is

Union Government agrees

Article 293(1) allows a State to borrow within the territory of India on the security of its Consolidated Fund, within limits fixed by the State Legislature.

Article 293(3) provides that a State may not raise any loan without the consent of the Government of India if any part of a loan made by the Union (or guaranteed by it) to that State is still outstanding. Since every State owes money to the Union, Union consent is in practice always needed; under Article 293(4) the Union may attach conditions to that consent.

Approval of the State Governor or of the State Finance Department does not satisfy this constitutional requirement; an outstanding Union loan is the reason consent is required, not a condition that by itself permits borrowing.

Hence, the answer is Union Government agrees.

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