Kerala to move SC over Centre's decision to slash borrowing limit

Thiruvananthapuram: The Central government informed that Kerala's borrowing limit is Rs 20,521 crores which is two percent of the state's Gross State Domestic Product (GSDP) for the current financial year.

Also read: Cutting down Kerala's borrowing limit: CPI(M) says Centre trying to suffocate state with 'fiscal ban'

The state government expected a total borrowing limit of Rs 32,442 crore which is 3 percent of the GSDP. However, unsatisfied with the Centre's decision, Kerala will move the Supreme Court against the Centre's decision.

Former Finance Minister Dr Thomas Isaac in a Facebook post said that Kerala has the right to borrow 3 percent of the state's GDP as per the Finance Commission decision for the current year. However, the Central government has slashed the limit to 2 percent. 

"Kerala is entitled to borrow 3 percent of the state's GSDP for the current year as per the decision of the Finance Commission. This is also contained in the Action Taken Report approved by Parliament. But now the central government says that Kerala has only the right to borrow 2 percent. The question is whether the central government has the right to cut the loan limit," he said. 

"The fiscal entitlement of the state has become the most important political issue in Kerala today. It has become clear that the baseless propaganda that Kerala is in debt and so on for two years was aimed at weakening Kerala's defence," the CPM leader added. 

The total debt of Kerala was Rs 1,86,453.86 crore in 2016-17 and has risen to Rs 3,35,641.15 crore in 2021-22.

Earlier, the ruling LDF government alleged that the Centre's decision to cut down the borrowing limit by half was an "attempt to suffocate the state". 

The borrowing cap has been reduced by the Centre to Rs 20,521 crores after taking into consideration the borrowings of the Kerala Infrastructure Investment Fund Board (KIIFB) and Kerala Social Security Pension Ltd (KSSPL), as well as other loans made under public accounts and deposited in the state's treasury.

The state's public accounts were worth Rs 13,177 crores as of Thursday, according to the Centre.