In a move that could severely affect State finances, the Centre has drastically cut down the State’s borrowing limit, Finance Minister K.N. Balagopal said on Friday.
The borrowing limit has been set at ₹15,390 crore. For the entire fiscal, the State government had been expecting eligibility for ₹32,442 crore (3% of the GSDP). For the first nine months, the State was expecting the limit to be set at ₹22,000 crore.
Mr. Balagopal condemned the Centre’s decision in strong terms, accusing it of attempting to strangle the State financially. Terming the decision a challenge thrown to the people of Kerala, he said that the Centre had made it a practice to deny or reduce grants and loans to the State.
Such decisions also have the political aim of hindering the development and welfare activities undertaken by the State Government, Mr. Balagopal said.
The Finance Minister called for a united stand against what he termed a flawed decision taken by the centre.
According to the Minister, the State would be deprived of about ₹20,000 crore due to the slashed borrowing limit and revenue deficit grant in 2023-24.
The State’s open market borrowings had come under the spotlight after the Centre decided to categorise borrowing by Kerala Infrastructure Investment Fund Board (KIIFB) and Kerala State Social Security Pension Ltd (KSSPL) as direct debt of the State.
Consequently, the Centre had decided to reduce ₹14,312.80 crore from the State’s borrowing limit, much to the dismay of the State which complained that it would reduce its fiscal space, affecting development priorities. This amount is being deducted in four annual installments.
