Article 293 of the Costitution of India with Case law
Article 293 of the Constitution of India
Title: Borrowing by States
🔹 Text of Article 293:
(1) Subject to the provisions of this Constitution, the executive power of a State to borrow 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.
(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 loan made by the Government of India to a State is outstanding, give such guarantees as it may think fit.
(3) 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 made to the State by the Government of India or in respect of which a guarantee has been given by the Government of India.
(4) Consent under clause (3) may be granted subject to such conditions, if any, as the Government of India may think fit to impose.
📘 Explanation of Article 293:
Article 293 governs the borrowing powers of State Governments in India. It draws a distinction between:
Internal borrowing (within India) — States can do so.
Conditions imposed by the Union — particularly when a State has outstanding loans from the Centre.
✅ Key Highlights:
| Clause | Provision |
|---|---|
| 293(1) | States can borrow within India upon security of their Consolidated Fund. |
| 293(2) | Union can lend money to States. |
| 293(3) | If a State owes money to the Union, it cannot borrow further without Union's prior consent. |
| 293(4) | Union’s consent under 293(3) can have conditions. |
🧾 Purpose of Article 293:
To maintain fiscal discipline among States.
To regulate State indebtedness, especially when Union funds are involved.
To prevent over-borrowing that could destabilize the national economy.
⚖️ Important Case Laws Related to Article 293:
🔹 State of Kerala v. Union of India
(2006)
Context: Kerala sought to raise loans despite outstanding dues to the Union.
Issue: Whether the Union could deny or conditionally allow further borrowing under Article 293(3).
Held: The Union has constitutional authority to impose reasonable restrictions or conditions under Article 293(3) if the State owes it money.
Significance: Reinforced Union's financial control over indebted States.
🔹 State of Madras v. Gannon Dunkerley & Co. (1959) – (Contextual Reference)
Though not directly on Article 293, it reflects on financial powers of States.
Relevance: Helped demarcate legislative and financial powers between the Centre and States under different articles.
🔹 Punjab Fiscal Responsibility and Budget Management Act Case (2020)
Issue: State exceeded borrowing limit under the Fiscal Responsibility and Budget Management (FRBM) Act.
Relevance: The FRBM limits must be read with Article 293 – States cannot borrow beyond certain limits without Union approval.
🔍 Real-world Application of Article 293:
| State | Scenario | Article 293 Applied |
|---|---|---|
| Punjab, 2022 | High public debt; Centre restricted further borrowing | Under 293(3), consent was needed |
| Tamil Nadu | Sought extra borrowing for welfare schemes | Required Union’s nod under 293(3) |
| Kerala | Claimed Centre used 293 to delay borrowing rights | Sparked debate on fiscal federalism |
🧩 Comparison with Related Articles:
| Article | Subject | Scope |
|---|---|---|
| 266 | Consolidated Funds | Basis for borrowing |
| 293 | State borrowing powers | Controlled if debt to Union exists |
| 280 | Finance Commission | Recommends debt relief and fiscal transfers |
| 360 | Financial Emergency | Centre gains broader control, including borrowing |
📌 Conclusion:
Article 293 plays a critical role in India's federal financial architecture, ensuring that while States can meet their own borrowing needs, they do so with accountability—especially when they are indebted to the Union.
It reflects a balance between fiscal autonomy and national financial stability, but also continues to raise debates on cooperative versus coercive federalism, particularly in times of political or economic stress.
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