Constitutional provisions and debt management  The Constitution of India has adopted a federal system of polity and governance, originally envisaging a two-tier structure: Central (i.e., federal) Government and State (i.e., provincial) Governments. With the Constitution (73rd and 74th) Amendment Acts, 1992, Local SelfGovernment Institutions (LSGIs), i.e., rural and urban local bodies have been accorded constitutional status as the third-tier of Government.
The Constitution provides for preparation of annual budgets and borrowings by the Centre, respectively, under Articles 112 and 292 and by the States under Articles 202 and 293. The Constitution assigns important responsibilities to the States in many sectors such as agricultural development, infrastructure, poverty alleviation, water supply and irrigation, public order, public health and sanitation.