Kerala finance minister urges central govt to revise borrowing restrictions imposed on state
T'puram: Finance minister KN Balagopal has urged his Union counterpart
Nirmala Sitharaman
to reconsider recent borrowing restrictions imposed on the state, citing revised economic indicators and policy changes that he says unfairly constrain Kerala's fiscal space.
In a memorandum submitted to the Union finance minister on Tuesday, Balagopal sought immediate intervention to address two key financial setbacks affecting the state's development agenda.
Highlighting the state's efforts at prudent fiscal management, Balagopal said that the state is currently grappling with several financial challenges that lie beyond its control. Chief among them is a deduction of Rs 1,877.57 crore from the state's borrowing ceiling for the financial year 2024-25.
This deduction was made as an adjustment for additional borrowing that was permitted during 2023-24, based on variations in the state's gross state domestic product (GSDP) figures.
Balagopal argued that while the GSDP for 2021-22 was revised downward, the subsequent years — 2022-23 and 2023-24 — saw substantial upward revisions. Despite this positive trend, the Rs 1,877.57 crore borrowed in FY 2023-24 was already deducted from the current year's borrowing ceiling, even as GSDP estimates for FY 2024-25 remain pending.
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He requested that the deduction be reversed, and the amount reallocated to FY 2025-26, in view of the upward revisions and the yet-to-be-finalised GSDP figures.
Balagopal also called for the restoration of Rs 3,323 crore that was deducted from Kerala's borrowing limit for the first three quarters of 2025-26 due to a newly introduced condition regarding the guarantee redemption fund (GRF). As per revised guidelines from the department of expenditure, any shortfall in GRF contributions — measured either as 0.25% of the GSDP or 5% of outstanding guarantees — results in a deduction from a state's borrowing ceiling.
Kerala, a revenue-deficit state, is in the process of establishing the GRF and plans to begin contributions in the current financial year. Balagopal urged the Centre to restore the deducted borrowing limit once Kerala notifies the creation of the GRF.
"These matters are critical to ensuring the financial stability and development trajectory of the state," Balagopal said in his memorandum, underscoring the importance of timely and favourable action from the Union govt.
The request comes amid ongoing tensions between several non-BJP-ruled states and the Centre over fiscal federalism, with Kerala frequently flagging concerns over perceived limitations on its financial autonomy.
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