Kerala not caught in debt trap, says finance minister Balagopal
Finance minister K N Balagopal on Wednesday rejected allegations that the state is caught in a debt trap, terming them politically motivated and factually incorrect.
Balagopal told a news conference that the state's borrowings were well within the limits prescribed by Fiscal Responsibility and Budget Management (FRBM) Act and undertaken with Centre's approval.
"We're only borrowing as much as required for development and welfare. In fact, our borrowings are lower than the ceiling set by Centre," he said.
He said Kerala is permitted to borrow up to 3.5% of its Gross State Domestic Product (GSDP), but borrowed only 2.5% in 2022-23 and 2.99% in 2023-24. "Even the borrowing we were entitled to was curtailed by Centre," he said.
Balagopal presented data to show that the state's debt-to-GSDP ratio declined steadily, from 38.47% in 2020-21 to a projected 33.9% in 2024-25.
"This is evidence of improving fiscal health," he said.
He acknowledged that total debt rose from Rs 2.96 lakh crore in 2020-21 to Rs 4.31 lakh crore in 2024-25. However, he said the GSDP expanded from Rs 7.79 lakh crore to Rs 12.75 lakh crore during the same period. "Our debt has not grown disproportionately. The size of our economy has increased significantly," Balagopal said.
He also criticised the previous UDF govt.
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"Between 2011 and 2016, GSDP growth was 11.6%, but debt grew at 14.9%. In contrast, under the present LDF govt, GSDP has grown at 13.5% and debt at only 9.8%," he said.
Balagopal said the state's debt traditionally doubled every five years. "Following that trend, our total liabilities should have touched Rs 6 lakh crore by 2025-26. But thanks to tighter control and a more responsible borrowing policy, they are expected to remain around Rs 4.65 lakh crore," he said.
"Even that would have been lower, had Centre not withheld funds we were legally entitled to borrow."
Balagopal said Rs 3,300 crore was cut from Kerala's borrowing limit for providing guarantees to loans taken by PSUs, with Centre citing the Guarantee Redemption Fund (GRF).
"Centre is now demanding that we earmark 5% of the total guarantees — worth around Rs 80,000 crore — as reserve in the GRF. This is an additional burden," he said.
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