Which of the following statements is/are correct regarding the borrowing powers of States in India? 1) A State requires the Centre’s consent for internal borrowing if it owes any debt to the Centre. 2) No State can raise loans from foreign sources without prior approval of the Union Government.

Correct — C. Both statements come from Article 293.

Statement 1 is clause (3): a State may not raise any loan without the consent of the Government of India while any part of a loan made or guaranteed by the Centre is outstanding.

Statement 2 follows from clause (1): a State's borrowing power extends to borrowing within the territory of India, so it cannot go to a foreign lender on its own. Option (c).

Why the others are wrong

• (a)
  Statement 1 is Correct — Statement 1 is right, but statement 2 is right too: Article 293(1) confines a State's borrowing to within India, and foreign loans are a Union List subject.
• (b)
  Statement 2 is Correct — Statement 2 is right, but so is statement 1, which is Article 293(3) in brief: while a Central loan is outstanding, any new State loan needs the Centre's consent.
• (d)
  Neither 1 nor 2 are Correct — Both rest on the text of Article 293: clause (3) for the consent rule and clause (1) for the territorial limit. Rejecting both ignores the Constitution's wording.

Borrowing is Chapter II of Part XII. Article 292 lets the Union borrow on the security of the Consolidated Fund of India, within limits Parliament may fix by law, and names no territorial limit.

Article 293 is narrower for States: borrowing within the territory of India, on the security of the State's Consolidated Fund, within limits the State legislature may fix.

The Centre may lend to States, and while such a loan is outstanding a State needs the Centre's consent to borrow again. That consent can carry conditions (clause 4).

Key facts

• Article 293(1): a State may borrow within the territory of India on the security of its Consolidated Fund.
• Article 293(3): a State needs the Government of India's consent to raise a loan while any Central loan, or Centre-guaranteed loan, is outstanding.
• Article 293(4): that consent may be granted subject to conditions.
• Foreign loans are entry 37 of the Union List, and public debt of the State is entry 43 of the State List.

Common traps

• Rejecting statement 2 because Article 293 never mentions foreign lenders: clause (1) limits State borrowing to within India, which rules them out.
• Reading statement 1 as applying only to loans the Centre made directly: clause (3) also covers loans the Centre guaranteed.

No directly related past PYQ was found.