centre-denies-kerala-s-plea-for-additional-borrowing-amid-fiscal-strain

In a setback for Kerala's financial aspirations, the Centre declined the state's plea for an additional borrowing of Rs 19,370 crore, citing concerns over fiscal prudence.

 

The decision was communicated by the union finance secretary to a delegation from Kerala, led by Chief Secretary V Venu, during a meeting in New Delhi.

Chief Secretary Venu, briefing reporters after the meeting, revealed that Kerala's request for additional borrowing was presented to the central government officials as per the Supreme Court's directives.

 

However, despite outlining the reasons for the state's demand, the union finance secretary remained steadfast in rejecting the proposal.

 

According to sources within the state finance ministry, Kerala believed it was entitled to the additional borrowing, citing an error in the calculation of its borrowing space.

 

The state had accepted the initial calculation methodology endorsed by the central government but later discovered a discrepancy that led to a reduction in its allocated borrowing space.

 

Earlier engagements between the Centre and Kerala had seen discussions about the release of over Rs 13,000 crore to the state, an amount Kerala claimed was rightfully due to it for the current fiscal year. However, the impasse persisted, leading to the Supreme Court's intervention.

 

The apex court, during a hearing on a suit filed by the Kerala government, urged both parties to resolve their differences amicably, emphasizing the importance of continued dialogue.

 

The suit, filed under Article 131, highlighted Kerala's assertion of its fiscal autonomy and accused the Union of India of encroaching upon its regulatory powers by imposing borrowing limits.

 

In response, the Centre argued that unchecked borrowing by states could jeopardize the nation's credit rating, citing concerns over Kerala's fiscal health. Despite the court's call for resolution, a meeting held in February failed to make significant progress, prompting the court to intervene once again.

 

As the legal battle ensues, Kerala finds itself at odds with the central government over its borrowing capacity, underscoring broader debates around fiscal autonomy and federalism in India.