Bihar Ramps Up Infrastructure Investment, But ₹9,689 Crore In Off-Budget Borrowings Bypass Legislature

Bihar recorded a 15.65% increase in capital outlay in 2023–24, spending ₹36,453.02 crore on sectors such as transport, irrigation, and urban development, according to the State Finances Audit Report for the year 2023–24 by the Comptroller and Auditor General (CAG) of India.

This marks a significant investment in infrastructure for one of India's most economically challenged states. 

Capital outlay now accounts for 15.91% of total state expenditure, up from 14.49% in the previous fiscal year (Section 2.5, Page 39).

“The State Government spent ₹36,453 crore on capital expenditure... primarily on infrastructure and development activities,” the report notes in the Executive Summary (Page viii).

However, the CAG simultaneously raised concerns about transparency and fiscal responsibility, highlighting that ₹9,689 crore was borrowed by various state Public Sector Undertakings (PSUs) during the same period. 

These borrowings were not routed through the Consolidated Fund of the State, as constitutionally required under Article 266(1), and were therefore not subjected to legislative approval or oversight.

“The Government has raised ₹9,689 crore as off-budget borrowing through PSUs. These liabilities, although repayable through the state budget, were not disclosed as part of the government’s debt profile,” the report stated in Chapter IV (Section 4.1, Page 115).

The largest portion of this borrowing -- ₹6,000 crore -- was undertaken by the Bihar State Food and Civil Supplies Corporation, followed by the Bihar State Road Development Corporation. 

These borrowings increase the state’s fiscal liabilities but remain excluded from official debt indicators.

The CAG report cautioned that while such off-budget borrowing may support infrastructure expansion, it undermines fiscal transparency and violates the principles outlined in the Bihar Fiscal Responsibility and Budget Management (BFRBM) Act.

Bihar’s debt-GSDP ratio stood at 38.94% at the end of FY 2023–24, close to the 40.40% limit prescribed by the 15th Finance Commission (Section 1.4.1, Page 12). 

If off-budget borrowings are included, the effective liability marginally exceeds this threshold at 38.95%.

No specific response from the Department of Finance or the state legislature was recorded in the audit on the matter of off-budget borrowing.