New Delhi, Sept. 11 -- States bumping up against India's constitutional borrowing limits are increasingly turning to state-owned corporations and special purpose vehicles to raise off-budget debt, masking the real extent of public leverage and stoking concerns of fiscal transparency.

Recent audits by the Comptroller and Auditor General of India (CAG) show a growing pattern among cash-strapped states using such enterprises to bypass annual borrowing limits. In audit reports tabled in Keralam in June and Maharashtra in July, the national auditor warned that such borrowings mask the true level of state debt, while ratings company Crisil Ratings noted in May that entities like the Kerala Infrastructure Investment Fund Board (KIIFB) continue ...